CBL & Associates Properties (CBL) 10-Q 2010 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 10-Q

______________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010

Or

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

FOR THE TRANSITION PERIOD FROM ____________ TO _______________

COMMISSION FILE NO. 1-12494

______________

CBL & ASSOCIATES PROPERTIES, INC.

(Exact Name of registrant as specified in its charter)

______________

DELAWARE                                                                                                                        62-1545718

(State or other jurisdiction of incorporation or organization)                                             (I.R.S. Employer Identification Number)

2030 Hamilton Place Blvd., Suite 500, Chattanooga, TN  37421-6000

(Address of principal executive office, including zip code)

423.855.0001

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x                                           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).

Yes o                                          No o

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.

Large accelerated filer  xAccelerated filer o

Non-accelerated filer o(Do not check if smaller reporting company)  Smaller Reporting Company o

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

Yes o                                           No x

As of August 4, 2010, there were 138,076,295 shares of common stock, par value $0.01 per share, outstanding.

1

CBL & Associates Properties, Inc.

Table of Contents

PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009	3
	Condensed Consolidated Statements of Operations for the Three and Six Month    Periods Ended June 30, 2010 and 2009	4
	Condensed Consolidated Statements of Equity for the Six Months    Ended June 30, 2010 and 2009	6
	Condensed Consolidated Statements of Cash Flows for the Six Months    Ended June 30, 2010 and 2009	8
	Notes to Unaudited Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
Item 4.	Controls and Procedures	50
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	(Removed and Reserved)	66
Item 5.	Other Information	66
Item 6.	Exhibits	66
	SIGNATURE	67

2

PART I – FINANCIAL INFORMATION

ITEM 1.  Financial Statements

CBL & Associates Properties, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

 (Unaudited)

ASSETS	June 30, 2010			December 31, 2009
Real estate assets:
Land	$	943,492		$	946,750
Buildings and improvements		7,557,570			7,569,015
		8,501,062			8,515,765
Less accumulated depreciation		(1,612,950	)		(1,505,840	)
		6,888,112			7,009,925
Developments in progress		99,748			85,110
Net investment in real estate assets		6,987,860			7,095,035
Cash and cash equivalents		60,649			48,062
Receivables:
Tenant, net of allowance for doubtful accounts of $3,241 in 2010      and $3,101 in 2009		69,268			73,170
Other		13,240			8,162
Mortgage and other notes receivable		38,025			38,208
Investments in unconsolidated affiliates		214,682			186,523
Intangible lease assets and other assets		273,253			279,950
	$	7,656,977		$	7,729,110
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Mortgage and other indebtedness	$	5,455,867		$	5,616,139
Accounts payable and accrued liabilities		290,347			248,333
Total liabilities		5,746,214			5,864,472
Commitments and contingencies (Notes 4 and 9)
Redeemable noncontrolling interests:
Redeemable noncontrolling partnership interests		25,933			22,689
Redeemable noncontrolling preferred joint venture interest		421,562			421,570
Total redeemable noncontrolling interests		447,495			444,259
Shareholders’ equity:
Preferred stock, $.01 par value, 15,000,000 shares authorized:
7.75% Series C Cumulative Redeemable Preferred Stock,      460,000 shares outstanding		5			5
7.375% Series D Cumulative Redeemable Preferred Stock, 1,330,000      and 700,000 shares outstanding in 2010 and 2009, respectively		13			7
Common stock, $.01 par value, 350,000,000 shares authorized, 138,075,609      and 137,888,408 issued and outstanding in 2010 and 2009, respectively		1,381			1,379
Additional paid-in capital		1,508,116			1,399,654
Accumulated other comprehensive income		4,310			491
Accumulated deficit		(335,173	)		(283,640	)
Total shareholders’ equity		1,178,652			1,117,896
Noncontrolling interests		284,616			302,483
Total equity		1,463,268			1,420,379
	$	7,656,977		$	7,729,110

The accompanying notes are an integral part of these balance sheets.

3

CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
REVENUES:
Minimum rents	$	170,239		$	170,491		$	339,060		$	342,428
Percentage rents		2,127			1,604			6,140			6,408
Other rents		4,598			4,142			9,174			8,422
Tenant reimbursements		76,347			81,695			156,170			163,179
Management, development and leasing fees		1,601			1,615			3,307			4,080
Other		7,234			6,977			14,471			13,067
Total revenues		262,146			266,524			528,322			537,584
EXPENSES:
Property operating		37,514			39,355			76,411			83,372
Depreciation and amortization		70,652			75,793			142,664			154,104
Real estate taxes		24,866			24,449			49,858			48,603
Maintenance and repairs		13,561			13,416			29,745			29,410
General and administrative		10,321			10,893			21,395			22,372
Loss on impairment of real estate		25,435			-			25,435			-
Other		6,415			5,914			13,116			11,071
Total expenses		188,764			169,820			358,624			348,932
Income from operations		73,382			96,704			169,698			188,652
Interest and other income		948			1,362			1,999			2,943
Interest expense		(73,341	)		(72,842	)		(146,801	)		(144,727	)
Loss on impairment of investment		-			-			-			(7,706	)
Gain (loss) on sales of real estate assets		1,149			72			2,015			(67	)
Equity in earnings of unconsolidated affiliates		409			62			948			1,596
Income tax benefit (provision)		1,911			(152	)		3,788			(755	)
Income from continuing operations		4,458			25,206			31,647			39,936
Operating income of discontinued operations		59			86			73			20
Loss on discontinued operations		-			(12	)		-			(72	)
Net income		4,517			25,280			31,720			39,884
Net (income) loss attributable to noncontrolling interests in:
Operating partnership		2,723			(5,109	)		(1,387	)		(6,415	)
Other consolidated subsidiaries		(6,124	)		(6,580	)		(12,261	)		(12,711	)
Net income attributable to the Company		1,116			13,591			18,072			20,758
Preferred dividends		(8,358	)		(5,454	)		(14,386	)		(10,909	)
Net income (loss) attributable to common shareholders	$	(7,242	)	$	8,137		$	3,686		$	9,849

The accompanying notes are an integral part of these statements.

4

CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

(Continued)

	Three Months Ended June 30,					Six Months Ended June 30,
	2010			2009		2010		2009
Basic per share data:
Income (loss) from continuing operations, net of preferred dividends	$	(0.05	)	$	0.10	$	0.03	$	0.13
Discontinued operations		-			-		-		-
Net income (loss) attributable to common shareholders	$	(0.05	)	$	0.10	$	0.03	$	0.13
Weighted average common shares outstanding		138,068			82,187		138,018		74,341
Diluted per share data:
Income (loss) from continuing operations, net of preferred dividends	$	(0.05	)	$	0.10	$	0.03	$	0.13
Discontinued operations		-			-		-		-
Net income (loss) attributable to common shareholders	$	(0.05	)	$	0.10	$	0.03	$	0.13
Weighted average common and potential dilutive common     shares outstanding		138,112			82,226		138,059		74,378
Amounts attributable to common shareholders:
Income (loss) from continuing operations, net of preferred dividends	$	(7,285	)	$	8,092	$	3,633	$	9,880
Discontinued operations		43			45		53		(31	)
Net income (loss) attributable to common shareholders	$	(7,242	)	$	8,137	$	3,686	$	9,849
Dividends declared per common share	$	0.20		$	0.11	$	0.40	$	0.48

The accompanying notes are an integral part of these statements.

5

CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Equity

(In thousands, except per share data)

				Equity
				Shareholders' Equity
	Redeemable Noncontrolling Partnership Interests			Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Shareholders' Equity			Noncontrolling Interests			Total Equity
Balance, January 1, 2009	$	18,393		$	12	$	664	$	993,941		$	(12,786	)	$	(193,307	)	$	788,524		$	380,472		$	1,168,996
Net income		2,688			-		-		-			-			20,758			20,758			6,095			26,853
Other comprehensive income:
Net unrealized gain (loss) on available-for-sale securities		193			-		-		-			192			-			192			(249	)		(57	)
Net unrealized gain on hedging instruments		342			-		-		-			3,053			-			3,053			1,728			4,781
Realized loss on foreign currency translation adjustment		3			-		-		-			44			-			44			28			72
Net unrealized gain on foreign currency translation       adjustment		350			-		-		-			2,529			-			2,529			1,300			3,829
Total other comprehensive income		888																5,818			2,807			8,625
Dividends declared - common stock		-			-		-		-			-			(39,744	)		(39,744	)		-			(39,744	)
Dividends declared - preferred stock		-			-		-		-			-			(10,909	)		(10,909	)		-			(10,909	)
Issuance of common stock and restricted common stock		-			-		-		414			-			-			414			-			414
Issuance of common stock for dividend		-			-		48		14,691			-			-			14,739			-			14,739
Issuance of common stock in equity offering		-			-		666		380,936			-			-			381,602			-			381,602
Cancellation of restricted common stock		-			-		-		(117	)		-			-			(117	)		-			(117	)
Accrual under deferred compensation arrangements		-			-		-		39			-			-			39			-			39
Amortization of deferred compensation		-			-		-		1,515			-			-			1,515			-			1,515
Additions to deferred financing costs		-			-		-		-			-			-			-			23			23
Transfer from noncontrolling interests to redeemable    noncontrolling interests		82,970			-		-		-			-			-			-			(82,970	)		(82,970	)
Issuance of noncontrolling interests for distribution		-			-		-		-			-			-			-			4,140			4,140
Distributions to noncontrolling interests		(6,262	)		-		-		-			-			-			-			(29,062	)		(29,062	)
Purchase of noncontrolling interest in other consolidated    subsidiaries		-			-		-		217			-			-			217			(717	)		(500	)
Adjustment for noncontrolling interests		(6,238	)		-		-		27,931			-			-			27,931			(21,693	)		6,238
Adjustment to record redeemable noncontrolling interests    at redemption value		(647	)		-		-		647			-			-			647			-			647
Balance, June 30, 2009	$	91,792		$	12	$	1,378	$	1,420,214		$	(6,968	)	$	(223,202	)	$	1,191,434		$	259,095		$	1,450,529

The accompanying notes are an integral part of these statements.

6

CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Equity

(In thousands, except per share data)

 

				Equity
				Shareholders' Equity
	Redeemable Noncontrolling Partnership Interests			Preferred Stock		Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Total Shareholders' Equity			Noncontrolling Interests			Total Equity
Balance, January 1, 2010	$	22,689		$	12	$	1,379	$	1,399,654		$	491		$	(283,640	)	$	1,117,896		$	302,483		$	1,420,379
Net income		1,874			-		-		-			-			18,072			18,072			1,550			19,622
Other comprehensive income (loss):
Net unrealized gain on available-for-sale securities		40			-		-		-			3,557			-			3,557			1,299			4,856
Net unrealized gain on hedging instruments		12			-		-		-			1,101			-			1,101			402			1,503
Realized loss on foreign currency translation adjustment		1			-		-		-			123			-			123			45			168
Net unrealized gain (loss) on foreign currency translation       adjustment		(397	)		-		-		-			(962	)		-			(962	)		1,203			241
Total other comprehensive income (loss)		(344	)															3,819			2,949			6,768
Dividends declared - common stock		-			-		-		-			-			(55,219	)		(55,219	)		-			(55,219	)
Dividends declared - preferred stock		-			-		-		-			-			(14,386	)		(14,386	)		-			(14,386	)
Issuance of preferred stock for equity offering		-			6		-		121,262			-			-			121,268			-			121,268
Issuance of common stock and restricted common stock		-			-		1		121			-			-			122			-			122
Cancellation of restricted common stock		-			-		-		(175	)		-			-			(175	)		-			(175	)
Exercise of stock options		-			-		1		941			-			-			942			-			942
Accrual under deferred compensation arrangements		-			-		-		16			-			-			16			-			16
Amortization of deferred compensation		-			-		-		1,485			-			-			1,485			-			1,485
Income tax effect of share-based compensation		(10	)		-		-		(1,468	)		-			-			(1,468	)		(337	)		(1,805	)
Distributions to noncontrolling interests		(4,536	)		-		-		-			-			-			-			(29,489	)		(29,489	)
Adjustment for noncontrolling interests		837			-		-		(8,297	)		-			-			(8,297	)		7,460			(837	)
Adjustment to record redeemable noncontrolling interests    at redemption value		5,423			-		-		(5,423	)		-			-			(5,423	)		-			(5,423	)
Balance, June 30, 2010	$	25,933		$	18	$	1,381	$	1,508,116		$	4,310		$	(335,173	)	$	1,178,652		$	284,616		$	1,463,268

The accompanying notes are an integral part of these statements.

7

CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	31,720		$	39,884
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		97,420			96,393
Amortization		47,058			62,142
Amortization of deferred finance costs and debt premiums (discounts)		3,440			(938	)
Net amortization of above- and below-market leases		(1,735	)		(3,112	)
(Gain) loss on sales of real estate assets		(2,015	)		67
Realized foreign currency loss		169			75
Loss on discontinued operations		-			72
Write-off of development projects		359			143
Share-based compensation expense		1,561			1,875
Income tax effect of share-based compensation		(1,815	)		-
Loss on impairment of investment		-			7,706
Loss on impairment of real estate		25,435			-
Equity in earnings of unconsolidated affiliates		(948	)		(1,596	)
Distributions of earnings from unconsolidated affiliates		2,730			6,020
Provision for doubtful accounts		1,745			3,797
Change in deferred tax accounts		349			712
Changes in:
Tenant and other receivables		(2,995	)		639
Other assets		739			(2,787	)
Accounts payable and accrued liabilities		(21,297	)		(11,947	)
Net cash provided by operating activities		181,920			199,145
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate assets		(45,417	)		(115,718	)
Distributions from restricted cash		688			2,699
Proceeds from sales of real estate assets		2,607			4,722
Additions to mortgage notes receivable		-			(4,437	)
Payments received on mortgage notes receivable		1,278			7,437
Additional investments in and advances to unconsolidated affiliates		(24,750	)		(42,012	)
Distributions in excess of equity in earnings of unconsolidated affiliates		24,861			45,464
Changes in other assets		(2,366	)		15,439
Net cash used in investing activities		(43,099	)		(86,406	)

The accompanying notes are an integral part of these statements.

8

CBL & Associates Properties, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

(Continued)

	Six Months Ended June 30,
	2010			2009
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage and other indebtedness	$	371,323		$	347,017
Principal payments on mortgage and other indebtedness		(528,867	)		(750,349	)
Additions to deferred financing costs		(2,343	)		(4,075	)
Proceeds from issuances of common stock		62			381,686
Proceeds from issuances of preferred stock		121,268			-
Proceeds from exercises of stock options		942			-
Income tax effect of share-based compensation		1,815			-
Purchase of noncontrolling interests in other consolidated subsidiary		-			(500	)
Distributions to noncontrolling interests		(41,550	)		(41,349	)
Dividends paid to holders of preferred stock		(14,386	)		(10,909	)
Dividends paid to common shareholders		(34,498	)		(34,405	)
Net cash used in financing activities		(126,234	)		(112,884	)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH		-			(293	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		12,587			(438	)
CASH AND CASH EQUIVALENTS, beginning of period		48,062			51,227
CASH AND CASH EQUIVALENTS, end of period	$	60,649		$	50,789
SUPPLEMENTAL INFORMATION:
Cash paid for interest, net of amounts capitalized	$	142,088		$	148,309

The accompanying notes are an integral part of these statements.

9

CBL & Associates Properties, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

(In thousands, except per share data)

Note 1 – Organization and Basis of Presentation

CBL & Associates Properties, Inc. (“CBL”), a Delaware corporation, is a self-managed, self-administered, fully integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air centers, community centers and office properties.  Its shopping center properties are located in 27 states, but are primarily in the southeastern and midwestern United States.

CBL conducts substantially all of its business through CBL & Associates Limited Partnership (the “Operating Partnership”).At June 30, 2010, the Operating Partnership owned controlling interests in 76 regional malls/open-air centers (including one mixed-use center), 30 associated centers (each located adjacent to a regional mall), ten community centers, and 13 office buildings, including CBL’s corporate office building. The Operating Partnership consolidates the financial statements of all entities in which it has a controlling financial interest or where it is the primary beneficiary of a variable interest entity.  At June 30, 2010, the Operating Partnership owned non-controlling interests in eight regional malls, four associated centers, four community centers and six office buildings. Because one or more of the other partners have substantive participating rights, the Operating Partnership does not control these partnerships and joint ventures and, accordingly, accounts for these investments using the equity method.  The Operating Partnership had a controlling interest in one community center, owned in a 75/25 joint venture that was under construction at June 30, 2010.  The Operating Partnership also holds options to acquire certain development properties owned by third parties.

CBL is the 100% owner of two qualified REIT subsidiaries, CBL Holdings I, Inc. and CBL Holdings II, Inc. At June 30, 2010, CBL Holdings I, Inc., the sole general partner of the Operating Partnership, owned a 1.1% general partner interest in the Operating Partnership and CBL Holdings II, Inc. owned a 71.6% limited partner interest for a combined interest held by CBL of 72.7%.

The noncontrolling interest in the Operating Partnership is held primarily by CBL & Associates, Inc. and its affiliates (collectively “CBL’s Predecessor”) and by affiliates of The Richard E. Jacobs Group, Inc. (“Jacobs”). CBL’s Predecessor contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for a limited partner interest when the Operating Partnership was formed in November 1993. Jacobs contributed their interests in certain real estate properties and joint ventures to the Operating Partnership in exchange for limited partner interests when the Operating Partnership acquired the majority of Jacobs’ interests in 23 properties in January 2001 and the balance of such interests in February 2002. At June 30, 2010, CBL’s Predecessor owned a 9.8% limited partner interest, Jacobs owned a 12.1% limited partner interest and third parties owned a 5.4% limited partner interest in the Operating Partnership.  CBL’s Predecessor also owned 7.3 million shares of CBL’s common stock at June 30, 2010, for a total combined effective interest of 13.6% in the Operating Partnership.

The Operating Partnership conducts CBL’s property management and development activities through CBL & Associates Management, Inc. (the “Management Company”) to comply with certain requirements of the Internal Revenue Code of 1986, as amended (the “Code”). The Operating Partnership owns 100% of both of the Management Company’s preferred stock and common stock.

CBL, the Operating Partnership and the Management Company are collectively referred to herein as “the Company”.

The accompanying condensed consolidated financial statements are unaudited; however, they have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting solely of normal recurring matters) necessary for a fair presentation of the financial statements for these interim periods have been included. Material

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intercompany transactions have been eliminated. The results for the interim period ended June 30, 2010 are not necessarily indicative of the results to be obtained for the full fiscal year.

In April 2009, the Company paid its first quarter dividend on its common stock of $0.37 per share in cash and shares of common stock.  The Company issued 4,754,355 shares of its common stock in connection with the dividend, which resulted in an increase of approximately 7.2% in the number of shares outstanding.  The Company elected to treat the issuance of its common stock as a stock dividend for earnings per share (“EPS”) purposes pursuant to accounting guidance that was in effect at that time.  Therefore, all share and per share information related to EPS was adjusted proportionately to reflect the additional common stock issued on a retrospective basis.  However, in January 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-01, Accounting for Stock Dividends, Including Distributions to Shareholders with Components of Stock and Cash (“ASU 2010-01”) requiring that stock dividends such as the one the Company made in April 2009 be treated as a stock issuance that is reflected in share and per share information related to EPS on a prospective basis.  Pursuant to the provisions of ASU 2010-01, the Company adopted this guidance on a retrospective basis.  Thus, the share and per share information related to EPS for the three and six months ended June 30, 2009 as previously presented in the Company’s Form 10-Q for the quarterly period ended June 30, 2009, has been revised herein to reflect this adoption.

The Company has evaluated subsequent events through the date of issuance of these financial statements.

These condensed consolidated financial statements should be read in conjunction with CBL’s audited consolidated financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2009, filed on February 22, 2010, as amended.

Note 2 – New Accounting Guidance

Effective January 1, 2010, the Company adopted ASU No. 2010-06, Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements (“ASU 2010-06”).  ASU 2010-06 provides that significant transfers in or out of measurements classified as Levels 1 or 2 should be disclosed separately along with reasons for the transfers.  Information regarding purchases, sales, issuances and settlements related to measurements classified as Level 3 are also to be presented separately.  Existing disclosures have been updated to include fair value measurement disclosures for each class of assets and liabilities and information regarding the valuation techniques and inputs used to measure fair value in measurements classified as either Levels 2 or 3.  The guidance was effective for fiscal years beginning after December 15, 2009 excluding the provision relating to the rollforward of Level 3 activity which has been deferred until January 1, 2011.  The adoption did not have an impact on the Company’s condensed consolidated financial statements.

Effective January 1, 2010, the Company adopted ASU No. 2009-16, Transfers and Servicing: Accounting for Transfers of Financial Assets (“ASU 2009-16”).  The guidance eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional related disclosures.  The adoption did not have an impact on the Company’s condensed consolidated financial statements.

Effective January 1, 2010, the Company adopted ASU No. 2009-17, Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”).  ASU 2009-17 modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting, or similar, rights should be consolidated.  The guidance clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.  This guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity.  It also requires additional disclosure about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement.  The adoption did not have an impact on the Company’s condensed consolidated financial statements.

On February 24, 2010, the FASB issued ASU No. 2010-09, Subsequent Events: Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”).  ASU 2010-09 amends the disclosure provision related to subsequent events by removing the requirement for an SEC filer to disclose a date through which

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subsequent events have been evaluated.  The new accounting guidance was effective immediately and was adopted by the Company upon the date of issuance.

Note 3 – Fair Value Measurements

The Company has categorized its financial assets and financial liabilities that are recorded at fair value into a hierarchy based on whether the inputs to valuation techniques are observable or unobservable.  The fair value hierarchy contains three levels of inputs that may be used to measure fair value as follows:

Level 1 – Inputs represent quoted prices in active markets for identical assets and liabilities as of the measurement date.

Level 2 – Inputs, other than those included in Level 1, represent observable measurements for similar instruments in active markets, or identical or similar instruments in markets that are not active, and observable measurements or market data for instruments with substantially the full term of the asset or liability.

Level 3 – Inputs represent unobservable measurements, supported by little, if any, market activity, and require considerable assumptions that are significant to the fair value of the asset or liability.  Market valuations must often be determined using discounted cash flow methodologies, pricing models or similar techniques based on the Company’s assumptions and best judgment.

The following tables set forth information regarding the Company’s financial instruments that are measured at fair value in the condensed consolidated balance sheets as of June 30, 2010 and December 31, 2009:

			Fair Value Measurements at Reporting Date Using
	Fair Value at June 30, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Available-for-sale securities	$	8,935	$	8,935	$	-	$	-
Privately held debt and equity securities		2,475		-		-		2,475
Interest rate caps		21		-		21		-
Liabilities:
Interest rate swaps	$	1,197	$	-	$	1,197	$	-

			Fair Value Measurements at Reporting Date Using
	Fair Value at December 31, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Available-for-sale securities	$	4,039	$	4,039	$	-	$	-
Privately held debt and equity securities		2,475		-		-		2,475
Interest rate cap		2		-		2		-
Liabilities:
Interest rate swaps	$	2,907	$	-	$	2,907	$	-

Intangible lease assets and other assets in the condensed consolidated balance sheets include marketable securities consisting of corporate equity securities that are classified as available for sale.  Net unrealized gains and losses on available-for-sale securities that are deemed to be temporary in nature are recorded as a component of accumulated other comprehensive income in redeemable noncontrolling interests, shareholders’ equity and

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noncontrolling interests.  If a decline in the value of an investment is deemed to be other than temporary, the investment is written down to fair value and an impairment loss is recognized in the current period to the extent of the decline in value.  During the three and six month periods ended June 30, 2010 and 2009, the Company did not recognize any realized gains and losses or write-downs related to sales or disposals of marketable securities or other-than-temporary impairments.  The fair value of the Company’s available-for-sale securities is based on quoted market prices and, thus, is classified under Level 1.  The following is a summary of the equity securities held by the Company as of June 30, 2010 and December 31, 2009:

			Gross Unrealized
	Adjusted Cost		Gains		Losses		Fair Value
June 30, 2010	$	4,207	$	4,732	$	4	$	8,935
December 31, 2009	$	4,207	$	-	$	168	$	4,039

The Company holds a secured convertible promissory note from, and a warrant to acquire shares of, Jinsheng Group (“Jinsheng”), in which the Company also holds a cost-method investment.  The secured convertible note is non-interest bearing and is secured by shares of Jinsheng.  Since the secured convertible note is non-interest bearing and there is no active market for Jinsheng’s debt, the Company performed an analysis on the note considering credit risk and discounting factors to determine the fair value.  The warrant was initially valued using estimated share price and volatility variables in a Black Scholes model.  Due to the significant estimates and assumptions used in the valuation of the note and warrant, the Company has classified these under Level 3.  As part of its investment review as of March 31, 2009, the Company determined that its investment in Jinsheng was impaired on an other than temporary basis due to a decline in expected future cash flows as a result of declining occupancy and sales related to the then downturn of the real estate market in China.  An impairment charge of $2,400 was recorded in the Company’s condensed consolidated statement of operations for the six month period ended June 30, 2009, to reduce the carrying values of the secured convertible note and warrant to their estimated fair values.  The Company performed qualitative and quantitative analyses of its investment as of June 30, 2010 and determined that the current balance of the secured convertible note and warrant of $2,475 is not impaired.  See Note 4 for further discussion.

The Company uses interest rate swaps to mitigate the effect of interest rate movements on its variable-rate debt.  The Company currently has two interest rate swaps included in accounts payable and accrued liabilities and two interest rate caps included in intangible lease assets and other assets in the accompanying condensed consolidated balance sheets that qualify as hedging instruments and are designated as cash flow hedges.  The swaps and caps have predominantly met the effectiveness test criteria since inception and changes in their fair values are, thus, primarily reported in other comprehensive income and are reclassified into earnings in the same period or periods during which the hedged items affect earnings.  The fair values of the Company’s interest rate hedge instruments, classified under Level 2, are determined using a proprietary model which is based on prevailing market data for contracts with matching durations, current and anticipated London Interbank Offered Rate (“LIBOR”) information, consideration of the Company’s credit standing, credit risk of the counterparties and reasonable estimates about relevant future market conditions.  See Note 5 for further information regarding the Company’s interest rate hedging activity.

The carrying values of cash and cash equivalents, receivables, accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short-term nature of these financial instruments.  Based on the interest rates for similar financial instruments, the carrying value of mortgage notes receivable is a reasonable estimate of fair value.  The estimated fair value of mortgage and other indebtedness was $5,823,793 and $5,830,722 at June 30, 2010 and December 31, 2009, respectively.  The estimated fair value was calculated by discounting future cash flows for the notes payable using estimated market rates at which similar loans would be made currently.

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The following table sets forth information regarding the Company’s assets that are measured at fair value on a nonrecurring basis:

			Fair Value Measurements at Reporting Date Using
	Fair Value at June 30, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Loss
Assets:
Long-lived assets	$	11,969	$	-	$	-	$	11,969	$	25,435

The Company evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances warrant such a review. The carrying value of a long-lived asset is considered impaired when its estimated future undiscounted cash flows are less than its carrying value. If it is determined that impairment has occurred, the amount of the impairment charge is equal to the excess of the asset’s carrying value over its estimated fair value. The Company’s estimates of undiscounted cash flows expected to be generated by each property are based on a number of assumptions such as leasing expectations, operating budgets, estimated useful lives, future maintenance expenditures, intent to hold for use and capitalization rates.  These assumptions are subject to economic and market uncertainties including, but not limited to, demand for space, competition for tenants, changes in market rental rates and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter the assumptions used, the future cash flows estimated in the Company’s impairment analyses may not be achieved.

During the course of the Company’s normal quarterly impairment review process for the second quarter of 2010, it was determined that a write-down of the depreciated book value of Oak Hollow Mall in High Point, NC, to its estimated fair value was necessary, resulting in a non-cash loss on impairment of real estate assets of $25,435 for the three and six months ended June 30, 2010.  Subsequent to June 30, 2010, the Company entered into a contract to sell this property, subject to due diligence and customary closing conditions, for a sales price that is significantly less than the property’s carrying value.  The impending sale was considered in the quarterly impairment review process, which resulted in a fair value of $11,578.  If the sale of this property closes in accordance with the terms of the current contract, the lender of the non-recourse loan secured by this property with a principal balance of $39,559 as of June 30, 2010 has agreed to modify the outstanding principal balance of the loan to equal the net sales price of the property.  See Note 9 for additional information.

The revenues of Oak Hollow Mall accounted for approximately 0.4% of total consolidated revenues for the trailing twelve months ended June 30, 2010.  A reconciliation of the property’s carrying values for the six months ended June 30, 2010 is as follows:

	Oak Hollow Mall
Beginning carrying value, January 1, 2010	$	37,287
Capital expenditures		512
Depreciation expense		(786	)
Loss on impairment of real estate		(25,435	)
Ending carrying value, June 30, 2010	$	11,578

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Note 4 – Unconsolidated Affiliates, Noncontrolling Interests and Cost Method Investments

Unconsolidated Affiliates

At June 30, 2010, the Company had investments in the following 20 entities, which are accounted for using the equity method of accounting:

Joint Venture	Property Name	Company's Interest
CBL-TRS Joint Venture, LLC	Friendly Center, The Shops at Friendly Center and a portfolio of six office buildings		50.0	%
CBL-TRS Joint Venture II, LLC	Renaissance Center		50.0	%
Governor’s Square IB	Governor’s Plaza		50.0	%
Governor’s Square Company	Governor’s Square		47.5	%
High Pointe Commons, LP	High Pointe Commons		50.0	%
High Pointe Commons II-HAP, LP	High Pointe Commons - Christmas Tree Shop		50.0	%
Imperial Valley Mall L.P.	Imperial Valley Mall		60.0	%
Imperial Valley Peripheral L.P.	Imperial Valley Mall (vacant land)		60.0	%
JG Gulf Coast Town Center LLC	Gulf Coast Town Center		50.0	%
Kentucky Oaks Mall Company	Kentucky Oaks Mall		50.0	%
Mall of South Carolina L.P.	Coastal Grand—Myrtle Beach		50.0	%
Mall of South Carolina Outparcel L.P.	Coastal Grand—Myrtle Beach (vacant land)		50.0	%
Mall Shopping Center Company	Plaza del Sol (1)		50.6	%
Parkway Place L.P.	Parkway Place		50.0	%
Port Orange I, LLC	The Pavilion at Port Orange Phase I		50.0	%
Port Orange II, LLC	The Pavilion at Port Orange Phase II		50.0	%
Triangle Town Member LLC	Triangle Town Center, Triangle Town Commons and Triangle Town Place		50.0	%
West Melbourne I, LLC	Hammock Landing Phase I		50.0	%
West Melbourne II, LLC	Hammock Landing Phase II		50.0	%
York Town Center, LP	York Town Center		50.0	%

 (1) Plaza del Sol was sold in June 2010. 

Although the Company has majority ownership of certain of these joint ventures, it has evaluated these investments and concluded that the other partners or owners in these joint ventures have substantive participating rights, such as approvals of:

·   the pro forma for the development and construction of the project and any material deviations or modifications thereto;

·   the site plan and any material deviations or modifications thereto;

·   the conceptual design of the project and the initial plans and specifications for the project and any material deviations or modifications thereto;

·   any acquisition/construction loans or any permanent financings/refinancings;

·   the annual operating budgets and any material deviations or modifications thereto;

·   the initial leasing plan and leasing parameters and any material deviations or modifications thereto; and

·   any material acquisitions or dispositions with respect to the project.

As a result of the joint control over these joint ventures, the Company accounts for these investments using the equity method of accounting.

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Condensed combined financial statement information for the unconsolidated affiliates is as follows:

	Total for the Three Months Ended June 30,						Company's Share for the Three Months Ended June 30,
	2010			2009			2010			2009
Revenues	$	38,331		$	39,940		$	21,686		$	22,817
Depreciation and amortization expense		(14,286	)		(13,071	)		(8,403	)		(7,471	)
Interest expense		(13,858	)		(12,691	)		(8,449	)		(7,426	)
Other operating expenses		(11,295	)		(13,490	)		(4,647	)		(7,942	)
Gain on sales of real estate assets		1,412			701			170			82
Operating income of discontinued operations		103			4			52			2
Net income	$	407		$	1,393		$	409		$	62

	Total for the Six Months Ended June 30,						Company's Share for the Six Months Ended June 30,
	2010			2009			2010			2009
Revenues	$	77,373		$	81,096		$	42,311		$	47,343
Depreciation and amortization expense		(27,244	)		(25,539	)		(15,205	)		(14,895	)
Interest expense		(27,701	)		(25,234	)		(15,612	)		(15,218	)
Other operating expenses		(23,627	)		(27,045	)		(10,753	)		(16,303	)
Gain on sales of real estate assets		1,290			1,689			121			646
Operating income of discontinued operations		170			46			86			23
Net income	$	261		$	5,013		$	948		$	1,596

Mall Shopping Center Company

In June 2010, the Company’s 50.6% owned unconsolidated joint venture, Mall Shopping Center Company, sold Plaza del Sol in Del Rio, TX.  The joint venture recognized a gain of $1,244 from the sale, of which the Company’s share was $75, net of the excess of its basis over its underlying equity in the amount of $554.  The results of operations of Mall Shopping Center Company have been reclassified to discontinued operations in the tables above for all periods presented.

CBL Macapa

In September 2008, the Company entered into a condominium partnership agreement with several individual investors to acquire a 60% interest in a new retail development in Macapa, Brazil.  The Company provided total funding of $1,189 related to the development.  In December 2009, the Company entered into an agreement to sell its 60% interest in this partnership with one of the condominium partnership’s investors for a gross sales price of $1,263, less closing costs for a net sales price of $1,201.  The sale closed in March 2010.  Upon closing, the buyer paid $200 and gave the Company two notes receivable totaling $1,001, both with an interest rate of 10%, for the remaining balance of the purchase price.  There was no gain or loss on this sale.  On April 22, 2010, the buyer paid the first note of $300, due on April 23, 2010, plus applicable interest.  Upon maturity of the second note of $701, due on June 8, 2010, the buyer requested additional time for payment.  The Company and buyer have agreed to revised terms regarding the second note of which the buyer will pay monthly installments of $45 from July 2010 to June 2011, with a final balloon installment of $161 due in July 2011.  Interest on the revised note is payable at maturity.Noncontrolling Interests

Noncontrolling interests includes the aggregate noncontrolling partnership interest in the Operating Partnership that is not owned by the Company and for which each of the noncontrolling limited partners has the right to exchange all or a portion of its partnership interests for shares of the Company’s common stock, or at the Company’s election, their cash equivalent.  Noncontrolling interests also includes the aggregate noncontrolling ownership interest in the Company’s other consolidated subsidiaries that is held by third parties and for which the related partnership agreements either do not include redemption

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 provisions or are subject to redemption provisions that do not require classification outside of permanent equity.  As of June 30, 2010, the total noncontrolling interests of $284,616 consisted of third-party interests in the Operating Partnership and in other consolidated subsidiaries of $283,737 and $879, respectively.  The total noncontrolling interests at December 31, 2009 of $302,483 consisted of third-party interests in the Operating Partnership and in other consolidated subsidiaries of $301,808 and $675, respectively.

Redeemable noncontrolling interests includes a noncontrolling partnership interest in the Operating Partnership that is not owned by the Company and for which the partnership agreement includes redemption provisions that may require the Company to redeem the partnership interest for real property.  Redeemable noncontrolling interests also includes the aggregate noncontrolling ownership interest in other consolidated subsidiaries that is held by third parties and for which the related partnership agreements contain redemption provisions at the holder’s election that allow for redemption through cash and/or properties.  The total redeemable noncontrolling partnership interests of $25,933 as of June 30, 2010 consisted of third-party interests in the Operating Partnership and in the Company’s consolidated subsidiary that provides security and maintenance services to third parties of $19,461 and $6,472, respectively.  At December 31, 2009, the total redeemable noncontrolling partnership interests of $22,689 consisted of third-party interests in the Operating Partnership and in the Company’s consolidated security and maintenance services subsidiary of $16,194 and $6,495, respectively.

The redeemable noncontrolling preferred joint venture interest includes the preferred joint venture units (“PJV units”) issued to the Westfield Group (“Westfield”) for the acquisition of certain properties during 2007.  See Note 9 for additional information related to the PJV units.  Activity related to the redeemable noncontrolling preferred joint venture interest represented by the PJV units is as follows:

	Six Months Ended June 30,
	2010			2009
Beginning Balance	$	421,570		$	421,279
Net income attributable to redeemable noncontrolling    preferred joint venture interest		10,217			10,343
Distributions to redeemable noncontrolling preferred    joint venture interest		(10,225	)		(10,165	)
Ending Balance	$	421,562		$	421,457

Cost Method Investments

In February 2007, the Company acquired a 6.2% noncontrolling interest in subsidiaries of Jinsheng, an established mall operating and real estate development company located in Nanjing, China, for $10,125.  As of June 30, 2010, Jinsheng owns controlling interests in four home decoration shopping centers, two general retail shopping centers and four development sites.

Jinsheng also issued to the Company a secured convertible promissory note in exchange for cash of $4,875. The note is secured by 16,565,534 Series 2 Ordinary Shares of Jinsheng.  The secured note is non-interest bearing and matures upon the earlier to occur of (i) January 22, 2012, (ii) the closing of the sale, transfer or other disposition of substantially all of Jinsheng’s assets, (iii) the closing of a merger or consolidation of Jinsheng or (iv) an event of default, as defined in the secured note. In lieu of the Company’s right to demand payment on the maturity date, the Company may, at its sole option, convert the outstanding amount of the secured note into 16,565,534 Series A-2 Preferred Shares of Jinsheng (which equates to a 2.275% ownership interest).

Jinsheng also granted the Company a warrant to acquire 5,461,165 Series A-3 Preferred Shares for $1,875.  The warrant expired on January 22, 2010.

The Company accounts for its noncontrolling interest in Jinsheng using the cost method because the Company does not exercise significant influence over Jinsheng and there is no readily determinable market value of Jinsheng’s shares since they are not publicly traded.  The Company initially recorded the secured note at its estimated fair value of $4,513, which included a discount of $362 due to the fact that it is non-interest bearing.  The discount is amortized to interest income over the term of the secured note using the effective interest method.  The noncontrolling interest and the secured note are reflected as investment in unconsolidated affiliates in the accompanying condensed consolidated balance sheets.

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As part of its investment review as of March 31, 2009, the Company determined that its noncontrolling interest in Jinsheng was impaired on an other-than-temporary basis due to a decline in expected future cash flows.  The decrease resulted from declining occupancy rates and sales due to the then downturn of the real estate market in China.  An impairment charge of $5,306 was recorded in the Company’s condensed consolidated statements of operations for the six months ended June 30, 2009 to reduce the carrying value of the Company’s cost-method investment to its estimated fair value.  The Company performed qualitative and quantitative analyses of its noncontrolling investment as of June 30, 2010 and determined that the current balance of its investment is not impaired.

Note 5 – Mortgage and Other Indebtedness

Mortgage and other indebtedness consisted of the following at June 30, 2010 and December 31, 2009, respectively:

	June 30, 2010					December 31, 2009
	Amount		Weighted Average Interest Rate (1)			Amount		Weighted Average Interest Rate (1)
Fixed-rate debt:
Non-recourse loans on operating properties	$	3,849,952		5.94	%	$	3,888,822		6.02	%
Recourse loans on operating properties (2)		159,443		5.27	%		160,896		5.28	%
Total fixed-rate debt		4,009,395		5.92	%		4,049,718		5.99	%
Variable-rate debt:
Recourse term loans on operating properties		377,027		2.09	%		242,763		1.68	%
Secured lines of credit		631,951		3.51	%		759,206		4.19	%
Unsecured term facilities		437,494		1.71	%		437,494		1.73	%
Construction loans		-		-			126,958		2.48	%
Total variable-rate debt		1,446,472		2.59	%		1,566,421		2.97	%
Total	$	5,455,867		5.04	%	$	5,616,139		5.15	%

(1)   Weighted-average interest rate includes the effect of debt premiums (discounts), but excludes amortization of deferred financing costs.

(2)   The Company has entered into interest rate swaps on notional amounts totaling $127,500 as of June 30, 2010 and December 31, 2009 related to two of its variable-rate loans on operating properties to effectively fix the interest rates on those loans.  Therefore, these amounts are currently reflected in fixed-rate debt.

Secured Lines of Credit

The Company has three secured lines of credit that are used for mortgage retirement, working capital, construction and acquisition purposes, as well as issuances of letters of credit. Each of these lines is secured by mortgages on certain of the Company’s operating properties. Borrowings under the secured lines of credit bear interest at LIBOR, subject to a floor of 1.50%, plus a margin ranging from 0.75% to 4.25% and had a weighted average interest rate of 3.51% at June 30, 2010. The Company also pays fees based on the amount of unused availability under its two largest secured lines of credit at an annual rate of 0.35% of unused availability. The following summarizes certain information about the secured lines of credit as of June 30, 2010:

	Total Capacity		Total Outstanding		Maturity Date	Extended Maturity Date
$	560,000	$	385,633		August 2011	April 2014
	525,000		243,318	(1)	February 2012	February 2013
	105,000		3,000	(2)	June 2011	N/A
$	1,190,000	$	631,951

(1)   There was an additional $7,291 outstanding on this secured line of credit as of June 30, 2010 for letters of credit.  Up to $50,000 of the capacity on this line can be used for letters of credit.

(2)   Subsequent to June 30, 2010, the Company extended the maturity date of this secured line of credit to June 2012.

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Subsequent to June 30, 2010, the Company closed on the extension and modification of its secured credit facility with total capacity of $105,000.  The facility’s maturity date was extended to June 2012 at its existing interest rate of LIBOR, subject to a floor of 1.50%, plus a margin of 300 basis points.  At June 1, 2011, the total capacity on this line of credit could decrease to $82,500 due to an exiting participant lender that has provided $22,500 of this line’s total capacity.  The Company is currently negotiating the terms with a potential replacement lender and believes that an agreement with a replacement lender or lenders will be executed prior to that date.

Unsecured Term Facilities

The Company has an unsecured term facility with total capacity of $228,000 that bears interest at LIBOR plus a margin of 1.50% to 1.80% based on the Company’s leverage ratio, as defined in the agreement to the facility.  At June 30, 2010, the outstanding borrowings of $228,000 under the unsecured term facility had a weighted average interest rate of 1.95%.  The facility matures in April 2011 and has two one-year extension options, which are at the Company’s election, for an outside maturity date of April 2013.

The Company has an unsecured term facility that was obtained for the exclusive purpose of acquiring certain properties from the Starmount Company or its affiliates.  At June 30, 2010, the outstanding borrowings of $209,494 under this facility had a weighted average interest rate of 1.45%.  The Company completed its acquisition of the properties in February 2008 and, as a result, no further draws can be made against the facility.  The unsecured term facility bears interest at LIBOR plus a margin of 0.95% to 1.40% based on the Company’s leverage ratio, as defined in the agreement to the facility.  Net proceeds from a sale, or the Company’s share of excess proceeds from any refinancings, of any of the properties originally purchased with borrowings from this unsecured term facility must be used to pay down any remaining outstanding balance.  The facility matures in November 2010 and has two one-year extension options, which are at the Company’s election, for an outside maturity date of November 2012.

Letters of Credit

At June 30, 2010, the Company had additional secured and unsecured lines of credit with a total commitment of $20,971 that can only be used for issuing letters of credit. The letters of credit outstanding under these lines of credit totaled $17,655 at June 30, 2010.

Covenants and Restrictions

The $560,000 and $525,000 secured line of credit agreements contain, among other restrictions, certain financial covenants including the maintenance of certain financial coverage ratios, minimum net worth requirements, and limitations on cash flow distributions.  The Company was in compliance with all covenants and restrictions at June 30, 2010.

The agreements to the $560,000 and $525,000 secured credit facilities and the two unsecured term facilities described above, each with the same lender, contain default and cross-default provisions customary for transactions of this nature (with applicable customary grace periods) in the event (i) there is a default in the payment of any indebtedness owed by the Company to any institution which is a part of the lender groups for thecredit facilities, or (ii) there is any other type of default with respect to any indebtedness owed by the Company to any institution which is a part of the lender groups for the credit facilities and such lender accelerates the payment of the indebtedness owed to it as a result of such default.  The credit facility agreements provide that, upon the occurrence and continuation of an event of default, payment of all amounts outstanding under these credit facilities and those facilities with which these agreements reference cross-default provisions may be accelerated and the lenders’ commitments may be terminated.  Additionally, any default in the payment of any recourse indebtedness greater than $50,000 or any non-recourse indebtedness greater than $100,000, regardless of whether the lending institution is a part of the lender groups for the credit facilities, will constitute an event of default under the agreements to the credit facilities.

Forty-seven malls/open-air centers, nine associated centers, three community centers and the corporate office building are owned by special purpose entities that are included in the Company’s consolidated financial statements. The sole business purpose of the special purpose entities is to own and operate these properties. The real estate and other assets owned by these special purpose entities are restricted under the loan agreements in that

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they are not available to settle other debts of the Company. However, so long as the loans are not under an event of default, as defined in the loan agreements, the cash flows from these properties, after payments of debt service, operating expenses and reserves, are available for distribution to the Company.

Mortgages on Operating Properties

During the second quarter of 2010, the Company entered into an $83,000 ten-year, non-recourse commercial mortgage-backed securities (“CMBS”) loan with a fixed interest rate of 6.00% secured by Burnsville Center in Minneapolis, MN.  The loan replaced an existing $60,683 loan that was scheduled to mature in August 2010.  The Company also entered into an eight-year $115,000 loan with a fixed interest rate of 6.98% secured by CoolSprings Galleria in Nashville, TN.  Proceeds from the new loan, plus cash on hand, were used to retire an existing loan of $120,463 that was scheduled to mature in September 2010.  Additionally, the Company closed on a new ten-year $14,800 loan with a fixed interest rate of 7.25% secured by The Terrace, a community center in Chattanooga, TN.  Excess proceeds from these financing activities were used to pay down the Company’s secured credit facilities.

Also during the second quarter, the Company repaid a CMBS loan with a principal balance of $8,988 secured by WestGate Crossing in Spartanburg, SC with borrowings from the $560,000 credit facility and the property was added to the collateral pool securing that facility.

During the first quarter of 2010, the Company closed on a variable-rate $72,000 non-recourse loan that bears interest at LIBOR plus a margin of 400 basis points secured by St. Clair Square in Fairview Heights, IL.  The new loan replaced an existing loan with a principal balance of $57,237.  The Company has an interest rate cap in place on this loan to limit the LIBOR rate to a maximum of 3.00%.  The cap matures in January 2012.  The excess proceeds received from the refinancing were used to pay down the secured credit facilities.  Also during the first quarter, the Company repaid a CMBS loan secured by Park Plaza  Mall in Little Rock, AK with a principal balance of $38,856 with borrowings from the $560,000 credit facility and the property was added to the collateral pool securing that facility.

Subsequent to June 30, 2010, the Company closed on a $65,000 ten-year, non-recourse CMBS loan with a fixed interest rate of 6.50% secured by Valley View Mall in Roanoke, VA.  The new loan replaced an existing loan with a principal balance of $40,639 that was scheduled to mature in September 2010.  The Company also repaid CMBS loans secured by Parkdale Mall and Parkdale Crossing in Beaumont, TX with an aggregate principal balance of $55,360 with borrowings from the $560,000 credit facility and the properties were added to the collateral pool securing that facility.

Scheduled Principal Payments

As of June 30, 2010, the scheduled principal payments of the Company’s consolidated debt, excluding extensions available at the Company’s option, on all mortgage and other indebtedness, including construction loans and lines of credit, are as follows:

2010	$	715,799
2011		1,148,641
2012		855,475
2013		451,649
2014		189,033
Thereafter		2,090,162
		5,450,759
Net unamortized premiums		5,108
	$	5,455,867

Of the $715,799 of scheduled principal payments in 2010, $680,102 relates to the maturing principal balances of ten operating property loans and an unsecured term facility.  Maturing debt with principal balances of $481,371 outstanding as of June 30, 2010 have extensions available at the Company’s option, leaving approximately $198,731 of loan maturities in 2010 that must be retired or refinanced.  Three loans secured by

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operating properties with a combined principal balance of $95,999 as of June 30, 2010 were either refinanced or repaid subsequent to the end of the quarter.  The remaining $102,732 of loan maturities in 2010 represents loans on four operating properties.  The Company has term sheets or availability on its lines of credit to address all of the remaining 2010 debt maturities.

The Company’s mortgage and other indebtedness had a weighted average maturity of 3.59 years as of June 30, 2010 and 3.66 years as of December 31, 2009.

Interest Rate Hedge Instruments

The Company records its derivative instruments in its condensed consolidated balance sheets at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the derivative has been designated as a hedge and, if so, whether the hedge has met the criteria necessary to apply hedge accounting.

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.  To accomplish these objectives, the Company primarily uses interest rate swaps and caps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.  Interest rate caps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium.

The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in accumulated other comprehensive income (loss) (“AOCI/L”) and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.  Such derivatives are used to hedge the variable cash flows associated with variable-rate debt.

As of June 30, 2010, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Interest Rate Derivative	Number of Instruments		Notional Amount
Interest Rate Swaps		2	$	127,500
Interest Rate Caps		2	$	152,000

Instrument Type	Location in Consolidated Balance Sheet	Notional Amount		Designated Benchmark Interest Rate	Strike Rate			Fair Value at 6/30/10			Fair Value at 12/31/09			Maturity Date
Cap	Intangible lease assets and other assets	$	72,000  (amortizing  to $69,375)	3-month LIBOR		3.000	%	$	21		$	-		Jan-12
Cap	Intangible lease assets and other assets		80,000	USD-SIFMA Municipal Swap Index		4.000	%		-			2		Dec-10
Pay fixed/ Receive    variable Swap	Accounts payable  and accrued liabilities		40,000	1-month LIBOR		2.175	%		(310	)		(636	)	Nov-10
Pay fixed/ Receive    variable Swap	Accounts payable and accrued liabilities		87,500	1-month LIBOR		3.600	%		(887	)		(2,271	)	Sep-10

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	Gain Recognized in OCI/L (Effective Portion)				Location of Losses Reclassified from (Effective	Loss Recognized in Earnings (Effective Portion)				Location of Gain (Ineffective	Gain Recognized in Earnings (Ineffective Portion)
Hedging	Three Months Ended June 30,				AOCI/L into Earnings	Three Months Ended June 30,				Recognized in Earnings	Three Months Ended June 30,
Instrument	2010		2009		Portion)	2010		2009		Portion)	2010		2009
Interest rate hedges	$	906	$	3,193	Interest Expense	$	(941)	$	(4,150)	Interest Expense	$	8	$	8

	Gain Recognized in OCI/L (Effective Portion)				Location of Losses Reclassified from (Effective	Loss Recognized in Earnings (Effective Portion)				Location of Gain (Ineffective	Gain Recognized in Earnings (Ineffective Portion)
Hedging	Six Months Ended June 30,				AOCI/L into Earnings	Six Months Ended June 30,				Recognized in Earnings	Six Months Ended June 30,
Instrument	2010		2009		Portion)	2010		2009		Portion)	2010		2009
Interest rate hedges	$	1,515	$	5,123	Interest Expense	$	(1,884)	$	(8,254)	Interest Expense	$	16	$	21

In addition, the Company has a $129,000 notional amount interest rate cap agreement to hedge the risk of changes in cash flows on a loan of one of its properties up to the cap notional amount.  The interest rate cap protects the Company from increases in the hedged cash flows attributable to overall changes in 1-month LIBOR above the strike rate of the cap on the debt.  The strike rate associated with the interest rate cap is 3.25%.  The Company did not designate this cap as a hedge under GAAP and, thus, records any changes in fair value on the cap as interest expense in the condensed consolidated statements of operations.  The Company recognized a gain of $6 and a loss of $65 during the three and six months ended June 30, 2009, respectively.  No gain or loss was recognized during the three and six months ended June 30, 2010.  The interest rate cap had no value as of June 30, 2010 and December 31, 2009 and matures in July 2010.

Note 6 – Comprehensive Income

Comprehensive income includes all changes in redeemable noncontrolling interests and total equity during the period, except those resulting from investments by shareholders and partners, distributions to shareholders and partners and redemption valuation adjustments. Other comprehensive income (“OCI”) includes changes in unrealized gains (losses) on available-for-sale securities, interest rate hedge agreements and foreign currency translation adjustments.  The computation of comprehensive income for the three and six months ended June 30, 2010 and 2009 is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010			2009
Net income	$	4,517	$	25,280	$	31,720		$	39,884
Other comprehensive income:
Net unrealized gain on hedging agreements		906		3,193		1,515			5,123
Net unrealized gain on available-for-sale securities		1,357		2,239		4,896			136
Realized loss on foreign currency translation       adjustment		-		27		169			75
Net unrealized gain (loss) on foreign currency       translation adjustment		-		3,431		(156	)		4,179
Total other comprehensive income		2,263		8,890		6,424			9,513
Comprehensive income	$	6,780	$	34,170	$	38,144		$	49,397

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The components of accumulated other comprehensive income (loss) as of June 30, 2010 and December 31, 2009 are as follows:

	June 30, 2010
	As reported in:
	Redeemable Noncontrolling Interests		Shareholders' Equity		Noncontrolling Interests			Total
Net unrealized gain (loss) on hedging    agreements	$	412	$	782	$	(2,639	)	$	(1,445	)
Net unrealized gain on available-for-sale    securities		301		3,528		899			4,728
Accumulated other comprehensive    income (loss)	$	713	$	4,310	$	(1,740	)	$	3,283

	December 31, 2009
	As reported in:
	Redeemable Noncontrolling Interests		Shareholders' Equity			Noncontrolling Interests			Total
Net unrealized gain (loss) on hedging    agreements	$	400	$	(319	)	$	(3,041	)	$	(2,960	)
Net unrealized gain (loss) on    available-for-sale securities		261		(29	)		(400	)		(168	)
Net unrealized gain (loss) on foreign    currency translation adjustment		396		839			(1,248	)		(13	)
Accumulated other comprehensive    income (loss)	$	1,057	$	491		$	(4,689	)	$	(3,141	)

Note 7 – Segment Information

The Company measures performance and allocates resources according to property type, which is determined based on certain criteria such as type of tenants, capital requirements, economic risks, leasing terms, and short and long-term returns on capital. Rental income and tenant reimbursements from tenant leases provide the majority of revenues from all segments. Information on the Company’s reportable segments is presented as follows:

Three Months Ended June 30, 2010	Malls			Associated Centers			Community Centers			All Other (2)			Total
Revenues	$	232,973		$	10,483		$	7,635		$	11,055		$	262,146
Property operating expenses (1)		(76,371	)		(2,717	)		(2,382	)		5,529			(75,941	)
Interest expense		(58,135	)		(1,934	)		(1,875	)		(11,397	)		(73,341	)
Other expense		-			-			-			(6,415	)		(6,415	)
Gain on sales of real estate assets		1,149			-			-			-			1,149
Segment profit (loss)	$	99,616		$	5,832		$	3,378		$	(1,228	)		107,598
Depreciation and amortization expense														(70,652	)
General and administrative expense														(10,321	)
Interest and other income														948
Loss on impairment of real estate														(25,435	)
Equity in earnings of unconsolidated affiliates														409
Income tax benefit														1,911
Income from continuing operations													$	4,458
Capital expenditures (3)	$	31,668		$	3,096		$	1,696		$	12,500		$	48,960

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Three Months Ended June 30, 2009	Malls			Associated Centers			Community Centers			All Other (2)			Total
Revenues	$	241,001		$	10,304		$	3,687		$	11,532		$	266,524
Property operating expenses (1)		(80,258	)		(2,459	)		(1,005	)		6,502			(77,220	)
Interest expense		(61,721	)		(2,173	)		(996	)		(7,952	)		(72,842	)
Other expense		(2	)		-			-			(5,912	)		(5,914	)
Gain on sales of real estate assets		4			-			9			59			72
Segment profit	$	99,024		$	5,672		$	1,695		$	4,229			110,620
Depreciation and amortization expense														(75,793	)
General and administrative expense														(10,893	)
Interest and other income														1,362
Equity in earnings of unconsolidated affiliates														62
Income tax provision														(152	)
Income from continuing operations													$	25,206
Capital expenditures (3)	$	47,996		$	2,641		$	429		$	23,352		$	74,418

Six Months Ended June 30, 2010	Malls			Associated Centers			Community Centers			All Other (2)			Total
Revenues	$	470,729		$	20,854		$	14,254		$	22,485		$	528,322
Property operating expenses (1)		(156,809	)		(5,579	)		(5,219	)		11,593			(156,014	)
Interest expense		(116,472	)		(3,978	)		(3,680	)		(22,671	)		(146,801	)
Other expense		-			-			-			(13,116	)		(13,116	)
Gain (loss) on sales of real estate assets		1,113			-			984			(82	)		2,015
Segment profit (loss)	$	198,561		$	11,297		$	6,339		$	(1,791	)		214,406
Depreciation and amortization expense														(142,664	)
General and administrative expense														(21,395	)
Interest and other income														1,999
Loss on impairment of real estate														(25,435	)
Equity in earnings of unconsolidated affiliates														948
Income tax benefit														3,788
Income from continuing operations													$	31,647
Total assets	$	6,574,654		$	327,793		$	67,633		$	686,897		$	7,656,977
Capital expenditures (3)	$	55,862		$	5,165		$	2,732		$	19,017		$	82,776

Six Months Ended June 30, 2009	Malls			Associated Centers			Community Centers			All Other (2)			Total
Revenues	$	485,032		$	20,758		$	9,057		$	22,737		$	537,584
Property operating expenses (1)		(164,350	)		(5,513	)		(3,072	)		11,550			(161,385	)
Interest expense		(122,560	)		(4,340	)		(2,020	)		(15,807	)		(144,727	)
Other expense		(2	)		-			-			(11,069	)		(11,071	)
Gain (loss) on sales of real estate assets		(1	)		-			98			(164	)		(67	)
Segment profit	$	198,119		$	10,905		$	4,063		$	7,247			220,334
Depreciation and amortization expense														(154,104	)
General and administrative expense														(22,372	)
Interest and other income														2,943
Loss on impairment of investment														(7,706	)
Equity in earnings of unconsolidated affiliates														1,596
Income tax provision														(755	)
Income from continuing operations													$	39,936
Total assets	$	6,884,164		$	334,788		$	70,489		$	654,091		$	7,943,532
Capital expenditures (3)	$	71,076		$	8,847		$	1,384		$	64,362		$	145,669

(1)	Property operating expenses include property operating, real estate taxes and maintenance and repairs.
(2)	The All Other category includes mortgage notes receivable, Office Buildings, the Management Company and the Company’s subsidiary that provides security and maintenance services.
(3)	Amounts include acquisitions of real estate assets and investments in unconsolidated affiliates. Developments in progress are included in the All Other category.

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Note 8 – Earnings Per Share

During the first quarter of 2010, the Company completed an underwritten public offering of 6,300,000 depositary shares, each representing 1/10th of a share of the Company’s 7.375% Series D Cumulative Redeemable Preferred Stock, having a liquidation preference of $25.00 per depositary share.  The depositary shares were sold at $20.30 per share including accrued dividends of $0.37 per share.  The net proceeds, after underwriting costs and related expenses, of approximately $123,599 were used to reduce outstanding borrowings under the Company’s credit facilities and for general corporate purposes.  The net proceeds included aggregate accrued dividends of $2,331 that were received as part of the offering price.

Including the shares issued in this offering, the Company now has 13,300,000 depositary shares outstanding, each representing 1/10th of a share of its 7.375% Series D Cumulative Redeemable Preferred Stock. The securities are redeemable at liquidation preference, plus accrued and unpaid dividends, at any time at the option of the Company. These securities have no stated maturity, sinking fund or mandatory redemption provisions and are not convertible into any other securities of the Company.

In June 2009, the Company completed a public offering of 66,630,000 shares of its $0.01 par value common stock for $6.00 per share. The net proceeds, after underwriting costs and related expenses, of approximately $381,823 were used to repay outstanding borrowings under the Company’s credit facilities.

In February 2009, the Company’s Board of Directors declared a quarterly dividend for the Company's common stock of $0.37 per share for the quarter ended March 31, 2009, to be paid in a combination of cash and shares of the Company’s common stock.  The dividend was paid on 66,407,096 shares of common stock outstanding on the record date.  The Company issued 4,754,355 shares of its common stock in connection with the dividend, which resulted in an increase of 7.2% in the number of shares outstanding.  The Company initially elected to treat the issuance of its common stock as a stock dividend for per share purposes and adjusted all share and per share information related to earnings per share on a retrospective basis to reflect the additional common stock issued.  However, in January 2010, the FASB issued ASU No. 2010-01, requiring that stock dividends such as the one the Company made in April 2009 be treated as a stock issuance that is reflected in share and per share information related to EPS on a prospective basis.  Pursuant to its provisions, the Company adopted this guidance effective January 1, 2009 on a retrospective basis.  Thus, the information presented for the three and six months ended June 30, 2009, has been revised to reflect this guidance.

Basic EPS is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS assumes the issuance of common stock for all potential dilutive common shares outstanding. The limited partners’ rights to convert their noncontrolling interests in the Operating Partnership into shares of common stock are not dilutive.

The following summarizes the impact of potential dilutive common shares on the denominator used to compute earnings per share:
 

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Denominator – basic earnings per share		138,068		82,187		138,018		74,341
Dilutive effect of deemed shares related to deferred    compensation arrangements		44		39		41		37
Denominator – diluted earnings per share		138,112		82,226		138,059		74,378

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Note 9 – Contingencies

The Company is currently involved in certain litigation that arises in the ordinary course of business. It is management’s opinion that the pending litigation will not materially affect the financial position or results of operations of the Company.

The Company consolidates its investment in a joint venture, CW Joint Venture, LLC (“CWJV”), with Westfield.  The terms of the joint venture agreement require that CWJV pay an annual preferred distribution at a rate of 5.0%, which increases to 6.0% on July 1, 2013, on the preferred liquidation value of the PJV units of CWJV that are held by Westfield.  Westfield has the right to have all or a portion of the PJV units redeemed by CWJV with property owned by CWJV, and subsequent to October 16, 2012, with either cash or property owned by CWJV, in each case for a net equity amount equal to the preferred liquidation value of the PJV units. At any time after January 1, 2013, Westfield may propose that CWJV acquire certain qualifying property that would be used to redeem the PJV units at their preferred liquidation value. If CWJV does not redeem the PJV units with such qualifying property (a “Preventing Event”), then the annual preferred distribution rate on the PJV units increases to 9.0% beginning July 1, 2013.  The Company will have the right, but not the obligation, to offer to redeem the PJV units after January 31, 2013 at their preferred liquidation value, plus accrued and unpaid distributions. If the Company fails to make such an offer, the annual preferred distribution rate on the PJV units increases to 9.0% for the period from July 1, 2013 through June 30, 2016, at which time it decreases to 6.0% if a Preventing Event has not occurred.  If, upon redemption of the PJV units, the fair value of the Company’s common stock is greater than $32.00 per share, then such excess (but in no case greater than $26,000 in the aggregate) shall be added to the aggregate preferred liquidation value payable on account of the PJV units.  The Company accounts for this contingency using the method prescribed for earnings or other performance measure contingencies.  As such, should this contingency result in additional consideration to Westfield, the Company will record the current fair value of the consideration issued as a purchase price adjustment at the time the consideration is paid or payable.

Guarantees

The Company may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on the Company’s investment in the joint venture. The Company may receive a fee from the joint venture for providing the guaranty. Additionally, when the Company issues a guaranty, the terms of the joint venture agreement typically provide that the Company may receive indemnification from the joint venture.

The Company owns a parcel of land that it is ground leasing to a third party developer for the purpose of developing a shopping center.  The Company has guaranteed 27% of the third party’s construction loan and bond line of credit (the “loans”) of which the maximum guaranteed amount is $31,554.  The total amount outstanding at June 30, 2010 on the loans was $77,201 of which the Company has guaranteed $20,844.  The third party’s loans matured in June 2010.  The third party is currently renegotiating the terms of the loans and the Company anticipates that the loans will be extended on renegotiated terms in the third quarter.  The Company recorded an obligation of $315 in the accompanying condensed consolidated balance sheets as of June 30, 2010 and December 31, 2009 to reflect the estimated fair value of its guaranty.

The Company has guaranteed 100% of the construction and land loans of West Melbourne I, LLC (“West Melbourne”), an unconsolidated affiliate in which the Company owns a 50% interest, of which the maximum guaranteed amount is $50,678.  West Melbourne developed Hammock Landing, a community center in West Melbourne, FL that opened in April 2009. The total amount outstanding at June 30, 2010 on the loans was $45,610. The guaranty will expire upon repayment of the debt.  The land loan, representing $3,276 of the amount outstanding at June 30, 2010, matures in August 2010 and has a one-year extension option available.  The construction loan, representing $42,334 of the amount outstanding at June 30, 2010, matures in August 2011 and has two one-year extension options available.  The Company recorded an obligation of $670 in the accompanying condensed consolidated balance sheets as of June 30, 2010 and December 31, 2009 to reflect the estimated fair value of this guaranty.

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The Company has guaranteed 100% of the construction loan of Port Orange I, LLC (“Port Orange”), an unconsolidated affiliate in which the Company owns a 50% interest, of which the maximum guaranteed amount is $97,183.  Port Orange developed and, in March 2010, opened The Pavilion at Port Orange, a community center in Port Orange, FL. The total amount outstanding at June 30, 2010 on the loan was $69,363. The guaranty will expire upon repayment of the debt.  The loan matures in December 2011 and has extension options available. The Company has recorded an obligation of $1,120 in the accompanying condensed consolidated balance sheets as of June 30, 2010 and December 31, 2009 to reflect the estimated fair value of this guaranty.

The Company has guaranteed the lease performance of York Town Center, LP (“YTC”), an unconsolidated affiliate in which we own a 50% interest, under the terms of an agreement with a third party that owns property as part of York Town Center. Under the terms of that agreement, YTC is obligated to cause performance of the third party’s obligations as landlord under its lease with its sole tenant, including, but not limited to, provisions such as co-tenancy and exclusivity requirements. Should YTC fail to cause performance, then the tenant under the third party landlord’s lease may pursue certain remedies ranging from rights to terminate its lease to receiving reductions in rent. The Company has guaranteed YTC’s performance under this agreement up to a maximum of $22,000, which decreases by $800 annually until the guaranteed amount is reduced to $10,000. The guaranty expires on December 31, 2020.  The maximum guaranteed obligation was $18,800 as of June 30, 2010.  The Company entered into an agreement with its joint venture partner under which the joint venture partner has agreed to reimburse the Company 50% of any amounts it is obligated to fund under the guaranty.  The Company did not record an obligation for this guaranty because it determined that the fair value of the guaranty is not material.

The Company has guaranteed 100% of a construction loan of JG Gulf Coast Town Center, LLC, an unconsolidated affiliate in which the Company owns a 50% interest, of which the maximum guaranteed amount is $11,561.  Proceeds from the construction loan are designated for the development of Phase III of Gulf Coast Town Center, an open-air center in Fort Myers, FL. The total amount outstanding at June 30, 2010 on the loans was $11,561. The guaranty will expire upon repayment of the debt.  The loan matures in April 2011 and has a one year extension option available.  The Company did not record an obligation for this guaranty because it determined that the fair value of the guaranty is not material.

Performance Bonds

The Company has issued various bonds that it would have to satisfy in the event of non-performance. At June 30, 2010 and December 31, 2009, the total amount outstanding on these bonds was $31,892 and $34,429, respectively.

Sale of Real Estate

As discussed in Note 3, subsequent to June 30, 2010, the Company entered into a contract to sell Oak Hollow Mall in High Point, NC, subject to due diligence and customary closing conditions, for a sales price that is significantly less than the property’s carrying value.  The impending sale was considered in the Company’s quarterly impairment review process, which resulted in a loss on impairment of real estate of $25,435 for the three and six month periods ended June 30, 2010.  If the sale of this property closes in accordance with the terms of the current contract, the lender of the non-recourse loan secured by this property with a principal balance of $39,559 as of June 30, 2010 has agreed to modify the outstanding principal balance of the loan to equal the net sales price of the property.  Should this occur, the Company anticipates recording a gain on extinguishment of debt of approximately $27,977 upon completion of the disposition.

Note 10 – Share-Based Compensation

Share-based compensation expense was $632 and $913 for the three months ended June 30, 2010 and 2009, respectively, and $1,561 and $1,875 for the six months ended June 30, 2010 and 2009, respectively. Share-based compensation cost capitalized as part of real estate assets was $48 and $61 for the three months ended June 30, 2010 and 2009, respectively, and $94 and $132 for the six months ended June 30, 2010 and 2009, respectively.

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The Company’s stock option activity for the six months ended June 30, 2010 is summarized as follows:

	Shares			Weighted Average Exercise Price
Outstanding at January 1, 2010		566,334		$	16.06
Exercised		(77,509	)		12.14
Cancelled		(1,200	)		18.27
Outstanding at June 30, 2010		487,625			16.68
Vested and exercisable at June 30, 2010		487,625			16.68

A summary of the status of the Company’s stock awards as of June 30, 2010, and changes during the six months ended June 30, 2010, is presented below:

	Shares			Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2010		156,120		$	33.16
Granted		119,100			10.34
Vested		(83,350	)		34.54
Cancelled		(820	)		18.02
Nonvested at June 30, 2010		191,050			18.40

As of June 30, 2010, there was $2,574 of total unrecognized compensation cost related to nonvested stock awards granted under the plan, which is expected to be recognized over a weighted average period of 3.0 years.  In February 2010, the Company granted restricted stock awards for 113,600 shares of common stock to employees that will vest in equal installments over the next five years.  In January 2010, the Company granted restricted stock awards for a total of 4,500 shares of common stock to its non-employee directors and granted an additional award of 1,000 shares in conjunction with the election of a new non-employee director in May 2010.

Note 11 – Noncash Investing and Financing Activities

The Company’s noncash investing and financing activities were as follows for the six months ended June 30, 2010 and 2009:

	Six Months Ended June 30,
	2010		2009
Accrued dividends and distributions payable	$	43,116	$	29,202
Additions to real estate assets accrued but not yet paid		13,624		13,475
Issuance of common stock for dividend		-		14,739
Issuance of noncontrolling interests in Operating Partnership for distribution		-		4,148
Notes receivable from sale of interest in unconsolidated affiliate		1,001		1,750
Additions to real estate assets from forgiveness of mortgage note receivable		-		6,502

Note 12 – Income Taxes

The Company is qualified as a REIT under the provisions of the Code. To maintain qualification as a REIT, the Company is required to distribute at least 90% of its taxable income to shareholders and meet certain other requirements.

As a REIT, the Company is generally not liable for federal corporate income taxes. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal and state income taxes on its taxable income at regular corporate tax rates. Even if the Company maintains its qualification as a REIT, the Company may be subject to certain state and local taxes on its income and property, and to federal income and excise taxes on its undistributed income. State tax expense was $1,324 and $1,969 during the three months ended June 30, 2010 and 2009, respectively, and $2,264 and $3,625 during the six months ended June 30, 2010 and 2009, respectively.

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The Company has also elected taxable REIT subsidiary status for some of its subsidiaries.  This enables the Company to receive income and provide services that would otherwise be impermissible for REITs. For these entities, deferred tax assets and liabilities are established for temporary differences between the financial reporting basis and the tax basis of assets and liabilities at the enacted tax rates expected to be in effect when the temporary differences reverse. A valuation allowance for deferred tax assets is provided if the Company believes all or some portion of the deferred tax asset may not be realized. An increase or decrease in the valuation allowance resulting from changes in circumstances that may affect the realizability of the related deferred tax asset is included in income or expense, as applicable.

The Company recorded an income tax benefit of $1,911 and an income tax provision of $152 for the three months ended June 30, 2010 and 2009, respectively.  The income tax benefit in 2010 consisted of a current tax benefit of $4,980 and a deferred tax provision of $3,069.  The income tax provision in 2009 consisted of a current tax benefit of $251 and a deferred tax provision of $403.

The Company recorded an income tax benefit of $3,788 and an income tax provision of $755 for the six months ended June 30, 2010 and 2009, respectively.  The income tax benefit in 2010 consisted of a current tax benefit of $6,370 and a deferred tax provision of $2,582.  The income tax provision in 2009 consisted of a current income tax provision of $1,075 and a deferred tax benefit of $320.

The Company had deferred tax assets of $6,226 and $3,634 at June 30, 2010 and December 31, 2009, respectively. The Company had a deferred tax liability of $2,941 at June 30, 2010.  There was no deferred tax liability as of December 31, 2009.  The deferred taxes at June 30, 2010 and December 31, 2009 consisted primarily of operating expense accruals and differences between book and tax depreciation.

The Company reports any income tax penalties attributable to its properties as property operating expenses and any corporate-related income tax penalties as general and administrative expenses in its statement of operations.  In addition, any interest incurred on tax assessments is reported as interest expense.  The Company reported nominal interest and penalty amounts for the three and six months ended June 30, 2010 and 2009, respectively.

ITEM 2:  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that are included in this Form 10-Q.  Capitalized terms used, but not defined, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations have the same meanings as defined in the notes to the condensed consolidated financial statements. In this discussion, the terms “we”, “us”, “our” and the “Company” refer to CBL & Associates Properties, Inc. and its subsidiaries.

Certain statements made in this section or elsewhere in this report may be deemed “forward-looking statements” within the meaning of the federal securities laws. In many cases, these forward-looking statements may be identified by the use of words such as “will,” “may,” “should,” “could,” “believes,” “expects,” “anticipates,” “estimates,” “intends,” “projects,” “goals,” “objectives,” “targets,” “predicts,” “plans,” “seeks,” or similar expressions.  Any forward-looking statement speaks only as of the date on which it is made and is qualified in its entirety by reference to the factors discussed throughout this report.

Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance or results and we can give no assurance that these expectations will be attained.  It is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of known and unknown risks and uncertainties. In addition to the risk factors described in Part II, Item 1A. of this report, such known risks and uncertainties include, without limitation:

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·   general industry, economic and business conditions;

·   interest rate fluctuations, costs and availability of capital and capital requirements;

·   costs and availability of real estate;

·   inability to consummate acquisition opportunities;

·   competition from other companies and retail formats;

·   changes in retail rental rates in our markets;

·   shifts in customer demands;

·   tenant bankruptcies or store closings;

·   changes in vacancy rates at our properties;

·   changes in operating expenses;

·   changes in applicable laws, rules and regulations; and

·   the ability to obtain suitable equity and/or debt financing and the continued availability of financing in the amounts and on the terms necessary to support our future business.

This list of risks and uncertainties is only a summary and is not intended to be exhaustive.  We disclaim any obligation to update or revise any forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking information.

EXECUTIVE OVERVIEW

We are a self-managed, self-administered, fully integrated real estate investment trust (“REIT”) that is engaged in the ownership, development, acquisition, leasing, management and operation of regional shopping malls, open-air centers, community centers and office properties. Our shopping centers are located in 27 states, but are primarily in the southeastern and midwestern United States.  We have elected to be taxed as a REIT for federal income tax purposes.

As of June 30, 2010, we owned controlling interests in 76 regional malls/open-air centers (including one mixed-use center), 30 associated centers (each located adjacent to a regional mall), ten community centers and 13 office buildings, including our corporate office building. We consolidate the financial statements of all entities in which we have a controlling financial interest or where we are the primary beneficiary of a variable interest entity. As of June 30, 2010, we owned noncontrolling interests in eight regional malls, four associated centers, four community centers and six office buildings. Because one or more of the other partners have substantive participating rights, we do not control these partnerships and joint ventures and, accordingly, account for these investments using the equity method.  We had one community center, owned in a 75/25 joint venture, under construction at June 30, 2010. We also hold options to acquire certain development properties owned by third parties.

During the second quarter of 2010, signs of positive results from our focus on creating revenue growth in our portfolio became evident.  Our overall portfolio occupancy level increased 160 basis points over the second quarter of the prior year.  We completed lease signings for nearly 1.3 million square feet of space in our operating properties and new developments.  In addition, same-store sales per square foot for the six months ended June 30, 2010 for stabilized mall tenants increased 2.1% over the prior-year period.

During the quarter, we also entered into financing transactions related to our pro rata share of consolidated and unconsolidated debt totaling $233.8 million secured by four operating properties, one of which is unconsolidated, generating excess proceeds of $27.1 million after repayment of existing loans.  We also repaid a mortgage with a principal balance of $9.0 million with proceeds from our $560.0 million secured line of credit.  Subsequent to June 30, 2010, we completed a refinancing of $65.0 million secured by one of our operating properties, generating excess proceeds of $24.4 million after repayment of an existing loan, and repaid two CMBS loans with an aggregate principal balance of $55.4 million secured by two operating properties with proceeds from our $560.0 million secured line of credit.  In addition, we extended the maturity date of our secured line of credit with total capacity of $105.0 million from June 2011 to June 2012.  We have term sheets or availability on our lines of credit to address all of our remaining 2010 debt maturities.  Including the use of the net proceeds received from our preferred stock offering in the first quarter of 2009, we have reduced our overall debt level by almost $233.0 million as compared to June 30, 2009.

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These accomplishments continue to emphasize the strength of our company and validate our strategic focus.  While the current retail real estate environment remains challenging, we believe CBL is emerging in a slow recovery with more efficient operations, an aggressive leasing strategy and continued success in securing capital on favorable terms.  We will look to maintain improvements in the performance of our portfolio over the remainder of the year and consistently build on our achievements.

RESULTS OF OPERATIONS

Comparison of the Three Months Ended June 30, 2010 to the Three Months Ended June 30, 2009

We have acquired or opened five community centers since January 1, 2009 (collectively referred to as the “New Properties”).  These transactions impact the comparison of the results of operations for the three and six months ended June 30, 2010 to the results of operations for the comparable periods ended June 30, 2009.  Properties that were in operation as of January 1, 2009 and June 30, 2010 are referred to as the “Comparable Properties.”  We do not consider a property to be one of the Comparable Properties until it has been owned or open for one complete calendar year.  The New Properties are as follows:

Property	Location	Date Opened
New Developments:
Hammock Landing (1)	West Melbourne, FL	April 2009
Summit Fair (2)	Lee's Summit, MO	August 2009
Settlers Ridge	Robinson Township, PA	October 2009
The Promenade	D'Iberville, MS	October 2009
The Pavilion at Port Orange (1)	Port Orange, FL	March 2010

(1) This property represents a 50/50 joint venture that is accounted for using the equity method of accounting and is included in equity in earnings of unconsolidated affiliates in the accompanying consolidated statements of operations.

(2) CBL’s interest represents cost of the land underlying the project for which it will receive ground rent and a percentage of the net operating cash flows.

Any reference to the New Properties in the discussion below excludes those properties that are accounted for using the equity method of accounting.

Revenues

Total revenues declined by $4.4 million for the three months ended June 30, 2010 compared to the prior- year period.  Rental revenues and tenant reimbursements declined by $4.6 million due to a decrease of $7.3 million from the Comparable Properties, partially offset by an increase of $2.7 million from the New Properties.  The decrease in revenues of the Comparable Properties was driven by declines of $5.4 million in tenant reimbursements, $1.3 million in base rents and $0.7 million in net below market lease amortization.  Tenant reimbursements have decreased primarily due to certain tenants converting their lease payment terms to percent in lieu or base rent.  Base rents and tenant reimbursements have both been impacted by negative leasing spreads over the past year.

The decline in our cost recovery ratio to 100.5% for the quarter ended June 30, 2010 from 105.8% for the prior-year period is primarily attributable to the significant decline in tenant reimbursements, as discussed above.

Management, development and leasing fees remained stable for the quarter ended June 30, 2010 compared to the prior year quarter.  While development fee income declined $0.3 million during the quarter due to the completion in the prior year of certain joint venture developments that were under construction during the first half of 2009, we experienced an offsetting increase in management and leasing fee income.

Other revenues increased $0.3 million primarily due to higher revenues related to our subsidiary that provides security and maintenance services to third parties.

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Operating Expenses

Total expenses increased $19.0 million for the three months ended June 30, 2010 compared to the prior-year period, primarily as a result of a $25.4 million loss on impairment of real estate, as discussed further below.  Property operating expenses, including real estate taxes and maintenance and repairs, decreased $1.3 million due to lower expenses of $2.3 million related to the Comparable Properties, partially offset by an increase of $1.0 million of expenses attributable to the New Properties.  The decrease in property operating expenses of the Comparable Properties is primarily attributable to reductions of $1.4 million in bad debt expense, $0.5 million in promotion-related costs, $0.3 million in land rent expense and $0.2 million in state tax expense.

The decrease in depreciation and amortization expense of $5.1 million resulted from a decrease of $6.6 million from the Comparable Properties, partially offset by an increase of $1.5 million related to the New Properties. The decrease attributable to the Comparable Properties is due to a decline in amortization of tenant allowances compared to the prior-year period, which included write-offs of certain unamortized tenant allowances related to several store closings.

During the course of our normal quarterly impairment review process for the second quarter of 2010, it was determined that a write-down of the depreciated book value of Oak Hollow Mall in High Point, NC, to its estimated fair value was necessary, resulting in a non-cash loss on impairment of real estate assets of $25.4 million for the three months ended June 30, 2010.  Subsequent to June 30, 2010, the Company entered into a contract to sell this property, subject to due diligence and customary closing conditions, for a sales price that is significantly less than the property’s carrying value.  The impending sale was considered in the quarterly impairment review process, which resulted in a fair value of approximately $11.6 million.  If the sale of this property closes in accordance with the terms of the current contract, the lender of the non-recourse loan secured by this property with a principal balance of approximately $39.6 million as of June 30, 2010 has agreed to modify the outstanding principal balance of the loan to equal the net sales price of the property.  Should this occur, we anticipate recording a gain on extinguishment of debt of approximately $28.0 million upon completion of the disposition.

General and administrative expenses decreased $0.6 million primarily as a result of declines of $0.3 million in payroll and related expenses and $0.5 million in state tax expense, partially offset by a reduction in capitalized overhead of $0.3 million. As a percentage of revenues, general and administrative expenses were 3.9% and 4.1% for the second quarters of 2010 and 2009, respectively.

Other expenses increased $0.5 million primarily due to higher expenses related to our subsidiary that provides security and maintenance services to third parties.

Other Income and Expenses

Interest expense increased $0.5 million for the three months ended June 30, 2010 compared to the prior-year period.  Although we have reduced our overall outstanding debt balance since the prior-year period, we have experienced an increase in our variable-rate debt primarily due to the expiration of two interest rate swaps on December 30, 2009 that had effectively fixed the interest rate on $400.0 million of borrowings under our $525.0 million secured line of credit.  The resulting interest savings from our overall decrease in debt have been partially offset by an increase in the variable rates on our credit facilities.  Additionally, capitalized interest has declined due to the opening of the New Properties in 2009.  Furthermore, interest expense during the second quarter of 2010 includes amortization of fees incurred in connection with the extension of our credit facilities in the latter half of 2009.

During the second quarter of 2010, we recognized a gain on sales of real estate assets of $1.1 million related to the sale of two parcels of land.  Results for the second quarter of 2009 included the sale of an easement.

Equity in earnings of unconsolidated affiliates increased by $0.4 million during the second quarter of 2010, primarily due to the opening of a new development.

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The income tax benefit of $1.9 million for the three months ended June 30, 2010 relates to our taxable REIT subsidiary and consists of a current tax benefit of $5.0 million and a deferred income tax provision of $3.1 million.  During the three months ended June 30, 2009, we recorded an income tax provision $0.2 million, consisting of a current tax benefit of $0.2 million, partially offset by a deferred income tax provision of $0.4 million.

Discontinued operations for the three months ended June 30, 2010 and 2009 include the true up of estimated expenses to actual amounts for properties sold during previous years.

Comparison of the Six Months Ended June 30, 2010 to the Six Months Ended June 30, 2009

Revenues

Total revenues declined by $9.3 million for the six months ended June 30, 2010 compared to the prior-year period.  Rental revenues and tenant reimbursements declined by $9.9 million due to a decrease of $14.5 million from the Comparable Properties, partially offset by an increase of $4.6 million from the New Properties.  The decrease in revenues of the Comparable Properties was driven by declines of $7.6 million in tenant reimbursements, $2.9 million in base rents, $1.8 million in lease termination fees and $1.4 million in net below market lease amortization.  Tenant reimbursements have decreased primarily due to certain tenants converting their lease payment terms to percent in lieu or base rent.  Base rents and tenant reimbursements have both been impacted by negative leasing spreads over the past year.

Our cost recovery ratio declined to 100.1% for the six months ended June 30, 2010 from 101.1% for the prior-year period primarily due to the significant decline in tenant reimbursements.

The decrease in management, development and leasing fees of $0.8 million was mainly attributable to lower development fee income due to the completion in the prior year of certain joint venture developments that were under construction during the prior-year period.

Other revenues increased $1.4 million primarily due to higher revenues related to our subsidiary that provides security and maintenance services to third parties.

Operating Expenses

Total expenses increased $9.7 million for the six months ended June 30, 2010 compared to the prior-year period, primarily as a result of a $25.4 million loss on impairment of real estate, as discussed further below.  However, property operating expenses, including real estate taxes and maintenance and repairs, decreased $5.4 million due to lower expenses of $7.4 million related to the Comparable Properties, partially offset by an increase of $2.0 million of expenses attributable to the New Properties. The decrease in property operating expenses of the Comparable Properties is primarily attributable to reductions of $2.7 million in promotion-related costs, $1.3 million in utilities expense, $1.2 million in security and maintenance expenses and $1.8 million in bad debt expense.  Property operating expenses continued to benefit from the cost containment program that we implemented in late 2008 and 2009.

The decrease in depreciation and amortization expense of $11.4 million resulted from a decrease of $14.1 million from the Comparable Properties, partially offset by an increase of $2.7 million related to the New Properties. The decrease attributable to the Comparable Properties is primarily due to a decline in amortization of tenant allowances compared to the prior-year period, which included write-offs of certain unamortized tenant allowances related to several store closings.

During the course of our normal quarterly impairment review process for the second quarter of 2010, it was determined that a write-down of the depreciated book value of Oak Hollow Mall in High Point, NC, to its estimated fair value was necessary, resulting in a non-cash loss on impairment of real estate assets of $25.4 million for the six months ended June 30, 2010.  Subsequent to June 30, 2010, the Company entered into a contract to sell this property, subject to due diligence and customary closing conditions, for a sales price that is significantly less than the property’s carrying value.  The impending sale was considered in the quarterly impairment review process, which resulted in a fair value of approximately $11.6 million.  If the sale of this

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property closes in accordance with the terms of the current contract, the lender of the non-recourse loan secured by this property with a principal balance of approximately $39.6 million as of June 30, 2010 has agreed to modify the outstanding principal balance of the loan to equal the net sales price of the property.  Should this occur, we anticipate recording a gain on extinguishment of debt of approximately $28.0 million upon completion of the disposition.

General and administrative expenses decreased $1.0 million primarily as a result of declines of $1.0 million in payroll and related expenses and $1.1 million in state tax expense, partially offset by a reduction in capitalized overhead of $1.0 million. As a percentage of revenues, general and administrative expenses were 4.0% and 4.2% for the six months ended June 30, 2010 and 2009, respectively.

Other expenses increased $2.0 million primarily due to higher expenses related to our subsidiary that provides security and maintenance services to third parties.

Other Income and Expenses

Interest expense increased $2.1 million for the six months ended June 30, 2010 compared to the prior-year period.  Although we have reduced our overall outstanding debt balance since the prior-year period, we have experienced an increase in our variable-rate debt primarily due to the expiration of two interest rate swaps on December 30, 2009 that had effectively fixed the interest rate on $400.0 million of borrowings under our $525.0 million secured line of credit.  The resulting interest savings from our overall decrease in debt have been partially offset by an increase in the variable rates on our credit facilities.  Our weighted average interest rate on total variable-rate debt increased 111 basis points compared to the prior-year period.  Additionally, capitalized interest has declined due to the opening of the New Properties in 2009.  Furthermore, interest expense during the first half of 2010 includes amortization of fees incurred in connection with the extension of our credit facilities in the latter half of 2009.

During the six months ended June 30, 2009, we incurred an impairment loss of $7.7 million on our investment in Jinsheng Group (“Jinsheng”), an established mall operating and real estate development company located in Nanjing, China, due to a decline in expected future cash flows.  The decrease was a result of declining occupancy and sales due to the then downturn of the real estate market in China.

During the six months ended June 30, 2010, we recognized a gain on sales of real estate assets of $2.0 million related to the sale of three parcels of land.  We recognized a loss on sales of real estate assets of $0.1 million during the six months ended June 30, 2009 due to the disposition of one of our investments in Brazil.

Equity in earnings of unconsolidated affiliates decreased by $0.6 million during the six months ended June 30, 2010 primarily due to a decline in outparcel sales compared to the prior-year period, partially offset by an increase related to the opening of a new development.

The income tax benefit of $3.8 million for the six months ended June 30, 2010 relates to our taxable REIT subsidiary and consists of a current tax benefit of $6.4 million, partially offset by a deferred income tax provision of $2.6 million.  During the six months ended June 30, 2009, we recorded an income tax provision $0.8 million, consisting of a provision for current income taxes of $1.1 million, partially offset by a deferred tax benefit of $0.3 million.

Discontinued operations for the six months ended June 30, 2010 and 2009 include the true up of estimated expenses to actual amounts for properties sold during previous years.

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Operational Review

The shopping center business is, to some extent, seasonal in nature with tenants typically achieving the highest levels of sales during the fourth quarter due to the holiday season, which generally results in higher percentage rents in the fourth quarter. Additionally, the malls earn most of their “temporary” rents (rents from short-term tenants) during the holiday period. Thus, occupancy levels and revenue production are generally the highest in the fourth quarter of each year. Results of operations realized in any one quarter may not be indicative of the results likely to be experienced over the course of the fiscal year.

We classify our regional malls into two categories – malls that have completed their initial lease-up are referred to as stabilized malls and malls that are in their initial lease-up phase and have not been open for three calendar years are referred to as non-stabilized malls. Alamance Crossing in Burlington, NC, which opened in August 2007, and our mixed-use center, Pearland Town Center (the financial results of which are classified in Malls), which opened in July 2008, are our only non-stabilized malls as of June 30, 2010.

We derive a significant amount of our revenues from the mall properties. The sources of our revenues by property type were as follows:
 

	Six Months Ended June 30,
	2010			2009
Malls		89.1	%		90.2	%
Associated centers		3.9	%		3.9	%
Community centers		2.7	%		1.7	%
Mortgages, office building and other		4.3	%		4.2	%

Mall store sales per square foot for the six months ended June 30, 2010 for our portfolio increased 2.1% from the prior-year period.  Mall store sales for the trailing twelve months ended June 30, 2010 on a comparable per square foot basis were $316 per square foot compared with $321 per square foot in the prior-year period, a decline of 1.5%.

Occupancy

Our portfolio occupancy is summarized in the following table:

	At June 30,
	2010			2009
Total portfolio occupancy		89.6	%		88.0	%
Total mall portfolio		89.8	%		88.7	%
Stabilized malls		90.1	%		89.1	%
Non-stabilized malls		76.9	%		72.2	%
Associated centers		91.9	%		88.7	%
Community centers		86.4	%		78.5	%

Occupancy levels at June 30, 2010 are a reflection of the strong relationships that we enjoy with our retail partners.  Our occupancy improvements during 2010 are an indication of the demand that we are receiving from retailers and their desire to locate in dominant properties.  Total portfolio occupancy increased 160 basis points from the prior-year period to 89.6%. Stabilized mall occupancy increased 100 basis points to 90.1% compared with the prior-year period.  Certain re-leased box locations opening in the associated center and community center portfolios, as well as specialty stores continuing to fulfill their expansion plans, have contributed to this growth.

During the second quarter of 2010, we experienced limited tenant bankruptcy activity.  We are optimistic that tenant bankruptcy and store closure rates will continue to decline over the year and remain below the average rates experienced since 2008.

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Leasing

During the second quarter of 2010, we signed more than 1.3 million square feet of leases including 1.2 million square feet of leases in our operating portfolio and approximately 0.1 million square feet of development leases.  The leases signed in our operating portfolio included 0.7 million square feet of new leases and 0.5 million square feet of renewals.

Average annual base rents per square foot were as follows for each property type:

	At June 30,
	2010		2009
Stabilized malls	$	28.95	$	29.27
Non-stabilized malls		25.41		26.71
Associated centers		11.89		11.90
Community centers		14.68		14.80
Office Buildings		19.21		19.09

Results from new and renewal leasing of comparable small shop space during the three and six months ended June 30, 2010 for spaces that were previously occupied are as follows:

	Square Feet		Prior Gross Rent PSF		New Initial Gross Rent PSF		% Change Initial			New Average Gross Rent PSF (2)		% Change Average
Quarter:
All Property Types (1)		580,855	$	39.25	$	33.83		-13.8	%	$	34.96		-10.9	%
Stabilized malls		505,012		42.12		36.27		-13.9	%		37.48		-11.0	%
New leases		203,391		41.87		36.04		-13.9	%		37.70		-10.0	%
Renewal leases		301,621		42.28		36.42		-13.9	%		37.33		-11.7	%
Year to Date:
All Property Types (1)		1,262,916		38.83		33.74		-13.1	%		34.70		-10.6	%
Stabilized malls		1,153,542		40.57		35.24		-13.1	%		36.24		-10.7	%
New leases		338,321		43.38		37.19		-14.3	%		39.06		-10.0	%
Renewal leases		815,221		39.41		34.42		-12.7	%		35.07		-11.0	%

(1)	Includes stabilized malls, associated centers, community centers and other.
(2)	Average Gross Rent does not incorporate allowable future increases for recoverable common area expenses.

During the second quarter of 2010, rental rates were signed at an average decrease of 10.9% from the prior gross rent per square foot on a same space basis.  However, there were several leasing deals that have disproportionately affected the results this quarter, especially nine leases totaling approximately 70,000 square feet with two national apparel retailers.  These nine deals negatively impacted our mall average leasing spread by almost 450 basis points.  The lease terms on these spaces are two years or less as we intend to replace the current leases at these locations with leases at more favorable market rates.

We are continuing to sign shorter term leases in locations where unoccupied space is not currently renting at favorable rates.  However, we are seeing the frequency of these situations slow and, excluding the nine leasing transactions described above, we are pleased by this trend and feel that the lease signings this quarter overall were stronger than in prior quarters.  We believe this trend will continue throughout the year as the economy recovers.  We will also be looking to improve the rental rates on shorter term deals that we have signed over the last twelve months as they expire.

LIQUIDITY AND CAPITAL RESOURCES

During the first quarter of 2010, we completed an equity offering of 6,300,000 depositary shares, each representing 1/10th of a share of our 7.375% Series D Cumulative Redeemable Preferred Stock, having a liquidation preference of $25.00 per share.  The depositary shares were sold at $20.30 per share including accrued dividends of $0.37 per share.  The net proceeds, after underwriting costs and related expenses, of approximately

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$123.6 million were used to reduce outstanding borrowings under our credit facilities and for general corporate purposes.  The net proceeds included accrued dividends of $2.3 million that were received as part of the offering price.

In June 2010, our 50.6% owned unconsolidated joint venture, Mall Shopping Center Company, sold Plaza del Sol in Del Rio, TX.  The joint venture recognized a gain of $1.2 million from the sale, of which our share was $0.1 million, net of the excess of our basis over our underlying equity in the amount of $0.6 million.

During the six months ended June 30, 2010, we entered into financing transactions related to our pro rata share of consolidated and unconsolidated debt totaling $305.8 million secured by five operating properties, one of which is unconsolidated.  After payment of the existing loans with principal balances totaling $263.9 million, plus accrued interest and closing costs, excess proceeds were used to pay down our secured credit facilities.

Also during the six months ended June 30, 2010, we repaid two CMBS loans, each secured by an operating property, with principal balances totaling $47.8 million with borrowings from the $560.0 million credit facility.  The two operating properties were added to the collateral pool securing that facility.

Subsequent to June 30, 2010, we closed on a $65.0 million loan related to one of our operating properties.  After payment of the existing loan with a principal balance of $40.6 million, plus accrued interest and closing costs, excess proceeds were used to pay down our secured credit facilities.  We also repaid two CMBS loans secured by two of our operating properties with an aggregate principal balance of $55.4 million with borrowings from the $560.0 million credit facility and the properties were added to the collateral pool securing that facility.  In addition, we closed on the extension and modification of our secured credit facility with total capacity of $105.0 million, extending the facility’s maturity date to June 2012 at its existing interest rate of LIBOR, subject to a floor of 1.50%, plus a margin of 300 basis points.  We have term sheets or availability on our lines of credit to address all of our remaining 2010 debt maturities.

We are encouraged by the positive changes in the capital markets.  The strength of the credit markets over the past few months has improved considerably, including increased availability of the emerging CMBS market.  In addition, it has been encouraging to receive more reasonable appraisal valuations on our more recent financing transactions than what we experienced a year ago.  As of June 30, 2010, we had more than $558.0 million available on our lines of credit.  Our performance relative to the financial covenants in our credit lines remained sound with a debt to gross asset value ratio of 54% and an interest coverage ratio of 2.3 times for the trailing twelve months.

We derive a majority of our revenues from leases with retail tenants, which has historically been the primary source for funding short-term liquidity and capital needs such as operating expenses, debt service, tenant construction allowances, recurring capital expenditures, dividends and distributions. We believe that the combination of our cash flows generated from our operations, combined with our debt and equity sources and the availability under our lines of credit will, for the foreseeable future, provide adequate liquidity to meet our cash needs.  In addition to these factors, we have options available to us to generate additional liquidity, including but not limited to, equity offerings, joint venture investments, issuances of noncontrolling interests in our Operating Partnership, decreasing the amount of expenditures we make related to tenant construction allowances and other capital expenditures and implementing further cost containment initiatives.  We also generate revenues from sales of peripheral land at the properties and from sales of real estate assets when it is determined that we can realize an optimal value for the assets.

Cash Flows From Operations

There was $60.6 million of unrestricted cash and cash equivalents as of June 30, 2010, an increase of $12.5 million from December 31, 2009.  Cash provided by operating activities during the six months ended June 30, 2010, decreased $17.2 million to $181.9 million from $199.1 million during the six months ended June 30, 2009. The decrease was primarily attributable to the decline in rental revenues, partially offset by lower operating expenses and the operations of the New Properties.

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Debt

The following tables summarize debt based on our pro rata ownership share, including our pro rata share of unconsolidated affiliates and excluding noncontrolling investors’ share of consolidated properties, because we believe this provides investors and lenders a clearer understanding of our total debt obligations and liquidity (in thousands):
 

	Consolidated		Noncontrolling Interests			Unconsolidated Affiliates		Total		Weighted Average Interest Rate (1)
June 30, 2010:
Fixed-rate debt:
Non-recourse loans on operating properties	$	3,849,952	$	(24,850	)	$	422,013	$	4,247,115		5.92	%
Recourse term loans on operating properties (2)		159,443		-			-		159,443		5.27	%
Total fixed-rate debt		4,009,395		(24,850	)		422,013		4,406,558		5.90	%
Variable-rate debt:
Non-recourse term loans on operating    properties		-		-			20,198		20,198		1.60	%
Recourse term loans on operating properties		377,027		(928	)		147,378		523,477		2.76	%
Secured lines of credit		631,951		-			-		631,951		3.51	%
Unsecured term facilities		437,494		-			-		437,494		1.71	%
Total variable-rate debt		1,446,472		(928	)		167,576		1,613,120		2.75	%
Total	$	5,455,867	$	(25,778	)	$	589,589	$	6,019,678		5.06	%

	Consolidated		Noncontrolling Interests			Unconsolidated Affiliates		Total		Weighted Average Interest Rate (1)
December 31, 2009:
Fixed-rate debt:
Non-recourse loans on operating properties	$	3,888,822	$	(23,737	)	$	404,104	$	4,269,189		5.99	%
Recourse loans on operating properties (2)		160,896		-			-		160,896		5.28	%
Total fixed-rate debt		4,049,718		(23,737	)		404,104		4,430,085		5.96	%
Variable-rate debt:
Recourse term loans on operating properties		242,763		(928	)		98,708		340,543		1.97	%
Construction loans		126,958		-			88,179		215,137		3.37	%
Land loans		-		-			3,276		3,276		2.23	%
Secured lines of credit		759,206		-			-		759,206		4.19	%
Unsecured term facilities		437,494		-			-		437,494		1.73	%
Total variable-rate debt		1,566,421		(928	)		190,163		1,755,656		3.04	%
Total	$	5,616,139	$	(24,665	)	$	594,267	$	6,185,741		5.13	%

(1)   Weighted average interest rate includes the effect of debt premiums (discounts), but excludes amortization of deferred financing costs.

(2)   We have entered into interest rate swaps on notional amounts totaling $127,500 as of June 30, 2010 and December 31, 2009 related to two of our variable-rate loans on operating properties to effectively fix the interest rates on these loans.  Therefore, these amounts are currently reflected in fixed-rate debt.

During the remainder of 2010, a total of $704.2 million of our pro rata share of consolidated and unconsolidated debt is scheduled to mature.  However, we have extensions of $484.6 million available at our option that we intend to exercise, leaving approximately $219.6 million of maturities in 2010 that must be retired or refinanced.

Subsequent to the end of the second quarter, we closed on a $65.0 million non-recourse CMBS loan secured by Valley View Mall in Roanoke, VA.  The new loan replaced an existing loan with a principal balance of $40.6 million that was scheduled to mature in September 2010.  We also repaid two CMBS loans secured by Parkdale Mall and Parkdale Crossing in Beaumont, TX with an aggregate principal balance of $55.4 million with borrowings from the $560.0 million credit facility and the properties were added to the collateral pool securing that facility.

The remaining loans due in 2010, totaling $123.6 million, relate to five property-specific loans, one of which is unconsolidated, that have maturity dates ranging from June 2010 to December 2010.  We have term sheets or availability on our lines of credit to address all of our remaining 2010 debt maturities.

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The weighted average remaining term of our total share of consolidated and unconsolidated debt was 3.6 years at June 30, 2010 and 3.7 years at December 31, 2009. The weighted average remaining term of our pro rata share of fixed-rate debt was 4.6 years and 4.5 years at June 30, 2010 and December 31, 2009, respectively.

As of June 30, 2010 and December 31, 2009, our pro rata share of consolidated and unconsolidated variable-rate debt represented 26.8% and 28.4%, respectively, of our total pro rata share of debt. As of June 30, 2010, our share of consolidated and unconsolidated variable-rate debt represented 18.3% of our total market capitalization (see Equity below) as compared to 21.1% as of December 31, 2009.

Secured Lines of Credit

We have three secured lines of credit that are used for mortgage retirement, working capital, construction and acquisition purposes, as well as issuances of letters of credit. Each of these lines is secured by mortgages on certain of our operating properties. Borrowings under the secured lines of credit bear interest at LIBOR, subject to a floor of 1.50%, plus a margin ranging from 0.75% to 4.25% and had a weighted average interest rate of 3.51% at June 30, 2010. The Company also pays fees based on the amount of unused availability under its two largest secured lines of credit at an annual rate of 0.35% of unused availability. The following summarizes certain information about the secured lines of credit as of June 30, 2010 (in thousands):

	Total Capacity		Total Outstanding		Maturity Date	Extended Maturity Date
$	560,000	$	385,633		August 2011	April 2014
	525,000		243,318	(1)	February 2012	February 2013
	105,000		3,000	(2)	June 2011	N/A
$	1,190,000	$	631,951

(1)   There was an additional $7,291 outstanding on this secured line of credit as of June 30, 2010 for letters of credit.  Up to $50,000 of the capacity on this line can be used for letters of credit.

(2)   Subsequent to June 30, 2010, the maturity date on this secured line of credit was extended to June 2012.

Subsequent to June 30, 2010, we closed on the extension and modification of our secured credit facility with total capacity of $105.0 million.  The facility’s maturity date was extended to June 2012 at its existing interest rate of LIBOR, subject to a floor of 1.50%, plus a margin of 300 basis points.  At June 1, 2011, the total capacity on this line of credit could decrease to $82.5 million due to an exiting participant lender that has provided $22.5 million of this line’s total capacity.  We are currently negotiating the terms with a potential replacement lender and believe that an agreement with a replacement lender or lenders will be executed prior to that date.

We also have secured and unsecured lines of credit with a total commitment of $21.0 million that are used only to issue letters of credit. There was $17.7 million outstanding under these lines at June 30, 2010.

Unsecured Term Facilities

We have an unsecured term facility with total availability of $228.0 million that bears interest at LIBOR plus a margin of 1.50% to 1.80% based on our leverage ratio, as defined in the agreement to the facility.  At June 30, 2010, the outstanding borrowings of $228.0 million under the unsecured term facility had a weighted average interest rate of 1.95%.  The facility matures in April 2011 and has two one-year extension options, which are at our election, for an outside maturity date of April 2013.

We have an unsecured term facility that was obtained for the exclusive purpose of acquiring certain properties from the Starmount Company or its affiliates.  At June 30, 2010, the outstanding borrowings of $209.5 million under this facility had a weighted average interest rate of 1.45%.  We completed our acquisition of the properties in February 2008 and, as a result, no further draws can be made against the facility.  The unsecured term facility bears interest at LIBOR plus a margin of 0.95% to 1.40% based on our leverage ratio, as defined in the agreement to the facility.  Net proceeds from a sale or our share of excess proceeds from any refinancings of any of the properties originally purchased with borrowings from this unsecured term facility must be used to pay

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down any remaining outstanding balance.  The facility matures in November 2010 and has two one-year extension options, which are at our election, for an outside maturity date of November 2012.

The agreements to the $560.0 million and $525.0 million secured credit facilities and the two unsecured term facilities described above, each with the same lender, contain default and cross-default provisions customary for transactions of this nature (with applicable customary grace periods) in the event (i) there is a default in the payment of any indebtedness owed by us to any institution which is a part of the lender groups for the credit facilities, or (ii) there is any other type of default with respect to any indebtedness owed by us to any institution which is a part of the lender groups for the credit facilities and such lender accelerates the payment of the indebtedness owed to it as a result of such default.  The credit facility agreements provide that, upon the occurrence and continuation of an event of default, payment of all amounts outstanding under these credit facilities and those facilities with which these agreements reference cross-default provisions may be accelerated and the lenders’ commitments may be terminated.  Additionally, any default in the payment of any recourse indebtedness greater than $50.0 million or any non-recourse indebtedness greater than $100.0 million, regardless of whether the lending institution is a part of the lender groups for the credit facilities, will constitute an event of default under the agreements to the credit facilities.  The Company was not in default with regard to any of these provisions as of June 30, 2010.

Mortgages on Operating Properties

During the second quarter of 2010, we entered into an $83.0 million ten-year, non-recourse CMBS loan with a fixed interest rate of 6.00% secured by Burnsville Center in Minneapolis, MN.  The loan replaced an existing $60.7 million loan that was scheduled to mature in August 2010.  We also entered into an eight-year $115.0 million loan with a fixed interest rate of 6.98% secured by CoolSprings Galleria in Nashville, TN.  Proceeds from the new loan, plus cash on hand, were used to retire an existing loan of $120.5 million that was scheduled to mature in September 2010.  Additionally, we closed on a new ten-year $14.8 million loan with a fixed interest rate of 7.25% secured by The Terrace in Chattanooga, TN.  Excess proceeds from these financing activities were used to pay down our secured credit facilities.

Also during the second quarter, we repaid a CMBS loan with a principal balance of $9.0 million secured by WestGate Crossing in Spartanburg, SC with borrowings from the $560.0 million credit facility and the property was added to the collateral pool securing that facility.

In addition, we entered into a $21.0 million ten-year, non-recourse CMBS loan with a fixed interest rate of 6.50% secured by Parkway Place, an unconsolidated operating property in Huntsville, AL.  The $21.0 million loan represents our 50% share of the total $42.0 million loan obtained on the property.  The loan replaced an existing $51.0 million loan that was scheduled to mature in June 2010, of which our 50% share was $25.5 million.

During the first quarter of 2010, we closed on a variable-rate $72.0 million non-recourse loan that bears interest at LIBOR plus a margin of 400 basis points secured by St. Clair Square in Fairview Heights, IL.  The new loan replaced an existing loan with a principal balance of $57.2 million.  We have an interest rate cap in place on this loan to limit the LIBOR rate to a maximum of 3.00%.  The cap matures in January 2012.  The excess proceeds received from the refinancing were used to pay down our secured credit facilities.  Also during the first quarter, we repaid a CMBS loan secured by Park Plaza Mall in Little Rock, AK with a principal balance of $38.9 million with borrowings from the $560.0 million credit facility and the property was added to the collateral pool securing that facility.

Subsequent to June 30, 2010, we closed on a $65.0 million ten-year, non-recourse CMBS loan with a fixed interest rate of 6.50% secured by Valley View Mall in Roanoke, VA.  The new loan replaced an existing loan with a principal balance of $40.6 million that was scheduled to mature in September 2010.  We also repaid two CMBS loans secured by Parkdale Mall and Parkdale Crossing in Beaumont, TX, with an aggregate principal balance of $55.4 million with borrowings from the $560.0 million credit facility and the properties were added to the collateral pool securing that facility.

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We own a parcel of land that we are ground leasing to a third party developer for the purpose of developing a shopping center.  We have guaranteed 27% of the third party’s construction loan and bond line of credit (the “loans”) of which the maximum guaranteed amount is $31.6 million.  The total amount outstanding at June 30, 2010 on the loans was $77.2 million of which we have guaranteed $20.8 million.  The third party’s loans matured in June 2010.  The third party is currently renegotiating the terms of the loans and we anticipate that the loans will be extended on renegotiated terms in the third quarter.  The $20.8 million guaranteed amount is included in our pro rata share of consolidated and unconsolidated debt at June 30, 2010.

Interest Rate Hedging Instruments

($ in 000's)
Instrument Type	Location in Consolidated Balance Sheet	Notional Amount		Designated Benchmark Interest Rate	Strike Rate			Fair Value at 6/30/10			Fair Value at 12/31/09			Maturity Date
Cap	Intangible lease assets and other assets	$	72,000  (amortizing  to $69,375)	3-month LIBOR		3.000	%	$	21		$	-		Jan-12
Cap	Intangible lease assets and other assets		80,000	USD-SIFMA Municipal Swap Index		4.000	%		-			2		Dec-10
Pay fixed/ Receive    variable Swap	Accounts payable and accrued liabilities		40,000	1-month LIBOR		2.175	%		(310	)		(636	)	Nov-10
Pay fixed/ Receive    variable Swap	Accounts payable and accrued liabilities		87,500	1-month LIBOR		3.600	%		(887	)		(2,271	)	Sep-10

Subsequent to June 30, 2010, we closed on the extension and modification of our secured credit facility with total capacity of $105.0 million.  The facility’s maturity date was extended to June 2012 at its existing interest rate of LIBOR, subject to a floor of 1.50%, plus a margin of 300 basis points.  At June 1, 2011, the total capacity on this line of credit could decrease to $82.5 million due to an exiting participant lender that has provided $22.5 million of this line’s total capacity.  We are currently negotiating the terms with a potential replacement lender and believe that an agreement with a replacement lender or lenders will be executed prior to that date.

Equity

In March 2010, we completed an underwritten public offering of 6,300,000 depositary shares, each representing 1/10th of a share of our 7.375% Series D Cumulative Redeemable Preferred Stock, having a liquidation preference of $25.00 per depositary share.  The depositary shares were sold at $20.30 per share including accrued dividends of $0.37 per share.  The net proceeds, after underwriting costs and related expenses, of approximately $123.6 million, including accrued dividends of $2.3 million, were used to reduce outstanding borrowings under our credit facilities and for general corporate purposes.

Including the shares issued in this offering, we now have 13,300,000 depositary shares outstanding, each representing 1/10th of a share of our 7.375% Series D Cumulative Redeemable Preferred Stock. The securities are redeemable at liquidation preference, plus accrued and unpaid dividends, at any time at our option. These securities have no stated maturity, sinking fund or mandatory redemption provisions and are not convertible into any of our other securities.

During the six months ended June 30, 2010, we paid cash dividends of $48.9 million to holders of our common stock and our preferred stock, as well as $41.6 million in distributions to the noncontrolling interest investors in our Operating Partnership and other consolidated subsidiaries.

On June 2, 2010, we announced a second quarter 2010 common stock dividend of $0.20 per share payable in cash.  The dividend was paid on July 15, 2010.  On February 22, 2010, we announced a first quarter

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2010 common stock dividend of $0.20 per share payable in cash, that was paid on April 16, 2010.  Future dividends payable will be determined by our Board of Directors based upon circumstances at the time of declaration.

As a publicly traded company, we have access to capital through both the public equity and debt markets. We currently have a shelf registration statement on file with the Securities and Exchange Commission authorizing us to publicly issue senior and/or subordinated debt securities, shares of preferred stock (or depositary shares representing fractional interests therein), shares of common stock, warrants or rights to purchase any of the foregoing securities, and units consisting of two or more of these classes or series of securities.  There is no limit to the offering price or number of securities that we may issue under this shelf registration statement.

Our strategy is to maintain a conservative debt-to-total-market capitalization ratio in order to enhance our access to the broadest range of capital markets, both public and private. Based on our share of total consolidated and unconsolidated debt and the market value of equity, our debt-to-total-market capitalization (debt plus market value of equity) ratio was as follows at June 30, 2010 (in thousands, except stock prices):

	Shares Outstanding		Stock Price (1)		Value
Common stock and operating partnership units		190,024	$	12.44	$	2,363,899
7.75% Series C Cumulative Redeemable Preferred Stock		460		250.00		115,000
7.375% Series D Cumulative Redeemable Preferred Stock		1,330		250.00		332,500
Total market equity						2,811,399
Company’s share of total debt						6,019,678
Total market capitalization					$	8,831,077
Debt-to-total-market capitalization ratio						68.2	%

(1) Stock price for common stock and Operating Partnership units equals the closing price of the common stock on June 30, 2010. The stock price for the preferred stock represents the liquidation preference of each respective series of preferred stock.

Capital Expenditures

Including our share of unconsolidated affiliates’ capital expenditures, we spent $13.5 million and $17.7 million during the three and six month periods ended June 30, 2010, respectively, for tenant allowances, which generally generate increased rents from tenants over the terms of their leases. Deferred maintenance expenditures were $3.6 million for the three months ended June 30, 2010 and included $1.3 million for roof replacements and $2.3 million for various other capital expenditures.  Deferred maintenance expenditures were $6.8 million for the six months ended June 30, 2010 and included $1.8 million for roof replacements and $5.0 million for various other capital expenditures.

Deferred maintenance expenditures are generally billed to tenants as common area maintenance expense, and most are recovered over a 5 to 15-year period. Renovation expenditures are primarily for remodeling and upgrades of malls, of which approximately 30% is recovered from tenants over a 5 to 15-year period.  We are recovering these costs through fixed amounts with annual increases or pro rata cost reimbursements based on the tenant’s occupied space.

As part of our strategy to strengthen our liquidity position, we have focused on reducing capital expenditures related to renovations and tenant allowances.  Since the vast majority of our properties have been renovated within the last ten years, we decided to delay any renovation plans during 2009 and do not have any renovations currently scheduled for 2010.

We completed one development project, The Pavilion at Port Orange, during the first quarter of 2010 and have one project under development, The Forum at Grandview, as of June 30, 2010.

Annual capital expenditures budgets are prepared for each of our properties that are intended to provide for all necessary recurring and non-recurring capital expenditures. We believe that property operating cash flows, which include reimbursements from tenants for certain expenses, will provide the necessary funding for these expenditures.

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Developments and Expansions

The following table summarizes our development projects as of June 30, 2010 (dollars in thousands):

Properties Opened During the Six Months Ended June 30, 2010

(Dollars in thousands)

Total Project

CBL's Share of

Property

Location

Square Feet

Total Cost (b)

Cost to Date (c)

Date Opened

Initial Yield

Community/Open-Air Centers:

The Pavilion at Port Orange (Phase I and Phase 1A) (a)

Port Orange, FL

492,394

$

67,439

$

70,747

Fall-09/Spring-10

7.3

%*

Properties Under Development at June 30, 2010

(Dollars in thousands)

Total  Project

CBL's Share of

Property

Location

Square Feet

Total Cost (b)

Cost to Date (c)

Date Opened

Initial Yield

Community/Open-Air Centers:

The Forum at Grandview Phase I (a)

Madison, MS

110,690

$

19,653

$

13,013

Fall-10

6.0

%*

(a)	The Pavilion at Port Orange is a 50/50 joint venture and The Forum at Grandview is a 75/25 joint venture.
(b)	Total Cost is presented net of reimbursements to be received.
(c)	Cost to Date does not reflect reimbursements until they are received.
*	Pro forma initial yields for phased projects reflect full land cost in Phase I.  Combined pro forma yields are higher than Phase I project yields.

We celebrated the grand opening of the first phase of The Pavilion at Port Orange, a 492,000-square-foot-open-air development in Port Orange, FL, on March 10, 2010.  The project opened approximately 92% leased or committed with anchors including Hollywood Theaters, Belk, HomeGoods, Marshalls, Michaels, PETCO and ULTA.

In March 2010, we started construction on the first phase of a 75/25 joint venture community center project in Madison, MS.  We converted our ground lease position into a 75% ownership interest in the development.  This project will serve to meet the strong retail demand in the Madison area of greater Jackson, MS.  The first phase of this project is 110,000 square feet comprised of anchors including Dick’s Sporting Goods, Best Buy and Stein Mart.  The project is 100% leased and is expected to open in the fourth quarter of 2010.

Subsequent to June 30, 2010, we began construction on second phases of our centers in Burlington, NC and Pittsburgh, PA.  In 2007, we opened Alamance Crossing and have now started construction on Alamance West, a 210,000-square-foot second phase.  The project will include a wholesale club, a sporting goods store and an 80,000-square-foot fashion anchor.  Alamance West is scheduled to open in fall 2011.

We are also starting construction on a 78,000-square-foot expansion of Settlers Ridge, which we opened last year.  The project will include Michaels, Ross Dress for Less and an additional junior anchor.  The project is scheduled to open in spring 2011.

We have entered into one option agreement for the development of a future shopping center.  Except for the projects presented above, we do not have any other material capital commitments as of June 30, 2010.

Off-Balance Sheet Arrangements

Unconsolidated Affiliates

We have ownership interests in 20 unconsolidated affiliates that are described in Note 4 to the consolidated financial statements. The unconsolidated affiliates are accounted for using the equity method of accounting and are reflected in the consolidated balance sheets as “Investments in Unconsolidated Affiliates.”  The following are circumstances when we may consider entering into a joint venture with a third party:

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§ Third parties may approach us with opportunities in which they have obtained land and performed some pre-development activities, but they may not have sufficient access to the capital resources or the development and leasing expertise to bring the project to fruition. We enter into such arrangements when we determine such a project is viable and we can achieve a satisfactory return on our investment. We typically earn development fees from the joint venture and provide management and leasing services to the property for a fee once the property is placed in operation.

§ We determine that we may have the opportunity to capitalize on the value we have created in a property by selling an interest in the property to a third party. This provides us with an additional source of capital that can be used to develop or acquire additional real estate assets that we believe will provide greater potential for growth. When we retain an interest in an asset rather than selling a 100% interest, it is typically because this allows us to continue to manage the property, which provides us the ability to earn fees for management, leasing, development and financing services provided to the joint venture.

Guarantees

We may guarantee the debt of a joint venture primarily because it allows the joint venture to obtain funding at a lower cost than could be obtained otherwise. This results in a higher return for the joint venture on its investment, and a higher return on our investment in the joint venture. We may receive a fee from the joint venture for providing the guaranty. Additionally, when we issue a guaranty, the terms of the joint venture agreement typically provide that we may receive indemnification from the joint venture partner.

We own a parcel of land that we are ground leasing to a third party developer for the purpose of developing a shopping center.  We have guaranteed 27% of the third party’s construction loan and bond line of credit (the “loans”) of which the maximum guaranteed amount is $31.6 million.  The total amount outstanding at June 30, 2010 on the loans was $77.2 million of which we have guaranteed $20.8 million.  The third party’s loans matured in June 2010.  The third party is currently renegotiating the terms of the loans and we anticipate that the loans will be extended on renegotiated terms in the third quarter.  We have recorded an obligation of $0.3 million in our condensed consolidated balance sheets as of June 30, 2010 and December 31, 2009 to reflect the estimated fair value of the guaranty.

We have guaranteed 100% of the construction and land loans of West Melbourne I, LLC (“West Melbourne”), an unconsolidated affiliate in which we own a 50% interest, of which the maximum guaranteed amount is $50.7 million.  West Melbourne developed and, in April 2009, opened Hammock Landing, a community center in West Melbourne, FL. The total amount outstanding at June 30, 2010 on the loans was $45.6 million.  The guaranty will expire upon repayment of the debt.  The land loan, representing $3.3 million of the amount outstanding at June 30, 2010, matures in August 2010 and has a one-year extension option available.  The construction loan, representing $42.3 million of the amount outstanding at June 30, 2010, matures in August 2011 and has two one-year extension options available.  We have recorded an obligation of $0.7 million in the accompanying condensed consolidated balance sheets as of June 30, 2010 and December 31, 2009 to reflect the estimated fair value of this guaranty.

We have guaranteed 100% of the construction loan of Port Orange I, LLC (“Port Orange”), an unconsolidated affiliate in which we own a 50% interest, of which the maximum guaranteed amount is $97.2 million.  Port Orange developed and, in March 2010, opened The Pavilion at Port Orange, a community center in Port Orange, FL. The total amount outstanding at June 30, 2010 on the loan was $69.4 million. The guaranty will expire upon repayment of debt.  The loan matures in December 2011 and has extension options available.  We have recorded an obligation of $1.1 million in the accompanying condensed consolidated balance sheets as of June 30, 2010 and December 31, 2009 to reflect the estimated fair value of this guaranty.

We have guaranteed the lease performance of York Town Center, LP (“YTC”), an unconsolidated affiliate in which we own a 50% interest, under the terms of an agreement with a third party that owns property as part of York Town Center. Under the terms of that agreement, YTC is obligated to cause performance of the third party’s obligations as landlord under its lease with its sole tenant, including, but not limited to, provisions such as co-tenancy and exclusivity requirements. Should YTC fail to cause performance, then the tenant under the third party landlord’s lease may pursue certain remedies ranging from rights to terminate its lease to receiving

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reductions in rent. We have guaranteed YTC’s performance under this agreement up to a maximum of $22.0 million, which decreases by $0.8 million annually until the guaranteed amount is reduced to $10.0 million. The guaranty expires on December 31, 2020.  The maximum guaranteed obligation was $18.8 million as of June 30, 2010.  We entered into an agreement with our joint venture partner under which the joint venture partner has agreed to reimburse us 50% of any amounts we are obligated to fund under the guaranty.  We did not record an obligation for this guaranty because we determined that the fair value of the guaranty is not material.

We have guaranteed 100% of a construction loan of JG Gulf Coast town Center, LLC, an unconsolidated affiliate in which we own a 50% interest, of which the maximum guaranteed amount is $11.6 million.  Proceeds from the construction loan are designated for the development of Phase III of Gulf Coast Town Center, an open-air center in Fort Myers, FL. The total amount outstanding at June 30, 2010 on the loan was $11.6 million. The guaranty will expire upon repayment of the debt.  The loan matures in April 2011 and has a one year extension option available.  We did not record an obligation for this guaranty because we determined that the fair value of the guaranty is not material.

Our guarantees and the related accounting are more fully described in Note 9 to the condensed consolidated financial statements.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are disclosed in Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009. The following discussion describes our most critical accounting policies, which are those that are both important to the presentation of our financial condition and results of operations and that require significant judgment or use of complex estimates.

Revenue Recognition

Minimum rental revenue from operating leases is recognized on a straight-line basis over the initial terms of the related leases.  Certain tenants are required to pay percentage rent if their sales volumes exceed thresholds specified in their lease agreements.  Percentage rent is recognized as revenue when the thresholds are achieved and the amounts become determinable.

We receive reimbursements from tenants for real estate taxes, insurance, common area maintenance, and other recoverable operating expenses as provided in the lease agreements.  Tenant reimbursements are recognized as revenue in the period the related operating expenses are incurred.  Tenant reimbursements related to certain capital expenditures are billed to tenants over periods of 5 to 15 years and are recognized as revenue when billed.

We receive management, leasing and development fees from third parties and unconsolidated affiliates. Management fees are charged as a percentage of revenues (as defined in the management agreement) and are recognized as revenue when earned.  Development fees are recognized as revenue on a pro rata basis over the development period.  Leasing fees are charged for newly executed leases and lease renewals and are recognized as revenue when earned. Development and leasing fees received from unconsolidated affiliates during the development period are recognized as revenue to the extent of the third-party partners’ ownership interest.  Fees to the extent of our ownership interest are recorded as a reduction to our investment in the unconsolidated affiliate.

Gains on sales of real estate assets are recognized when it is determined that the sale has been consummated, the buyer’s initial and continuing investment is adequate, our receivable, if any, is not subject to future subordination, and the buyer has assumed the usual risks and rewards of ownership of the asset. When we have an ownership interest in the buyer, gain is recognized to the extent of the third party partner’s ownership interest and the portion of the gain attributable to our ownership interest is deferred.

Real Estate Assets

We capitalize predevelopment project costs paid to third parties.  All previously capitalized predevelopment costs are expensed when it is no longer probable that the project will be completed.  Once development of a project commences, all direct costs incurred to construct the project, including interest and real estate taxes, are capitalized.  Additionally, certain general and administrative expenses are allocated to the projects and capitalized based on the amount of time applicable personnel work on the development project. 

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Ordinary repairs and maintenance are expensed as incurred.  Major replacements and improvements are capitalized and depreciated over their estimated useful lives.

All acquired real estate assets are accounted for using the purchase method of accounting and accordingly, the results of operations are included in the consolidated statements of operations from the respective dates of acquisition.  The purchase price is allocated to (i) tangible assets, consisting of land, buildings and improvements, as if vacant, and tenant improvements and (ii) identifiable intangible assets and liabilities generally consisting of above- and below-market leases and in-place leases.  We use estimates of fair value based on estimated cash flows, using appropriate discount rates, and other valuation methods to allocate the purchase price to the acquired tangible and intangible assets.  Liabilities assumed generally consist of mortgage debt on the real estate assets acquired.  Assumed debt with a stated interest rate that is significantly different from market interest rates is recorded at its fair value based on estimated market interest rates at the date of acquisition.

Depreciation is computed on a straight-line basis over estimated lives of 40 years for buildings, 10 to 20 years for certain improvements and 7 to 10 years for equipment and fixtures. Tenant improvements are capitalized and depreciated on a straight-line basis over the term of the related lease.  Lease-related intangibles from acquisitions of real estate assets are amortized over the remaining terms of the related leases.  The amortization of above- and below-market leases is recorded as an adjustment to minimum rental revenue, while the amortization of all other lease-related intangibles is recorded as amortization expense.  Any difference between the face value of the debt assumed and its fair value is amortized to interest expense over the remaining term of the debt using the effective interest method.

Carrying Value of Long-Lived Assets

We periodically evaluate long-lived assets to determine if there has been any impairment in their carrying values and record impairment losses if there are indicators of impairment and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. If it is determined that an impairment has occurred, the excess of the asset’s carrying value over its estimated fair value is charged to operations.

During the course of our normal quarterly impairment review process for the second quarter of 2010, it was determined that a write-down of the depreciated book value of Oak Hollow Mall in High Point, NC, to its estimated fair value was necessary, resulting in a non-cash loss on impairment of real estate assets of $25.4 million for the three and six months ended June 30, 2010.  Subsequent to June 30, 2010, we entered into a contract to sell this property, subject to due diligence and customary closing conditions, for a sales price that is significantly less than the property’s carrying value.  The impending sale was considered in the quarterly impairment review process, which resulted in a fair value of $11.6 million.  If the sale of this property closes in accordance with the terms of the current contract, the lender of the non-recourse loan secured by this property with a principal balance of $39.6 million as of June 30, 2010 has agreed to modify the outstanding principal balance of the loan to equal the net sales price of the property.  Should this occur, we anticipate recording a gain on extinguishment of debt of approximately $28.0 million upon completion of the disposition.

No impairments of the carrying values of long-lived assets were incurred during the three and six month periods ended June 30, 2009.

Allowance for Doubtful Accounts

We periodically perform a detailed review of amounts due from tenants to determine if accounts receivable balances are impaired based on factors affecting the collectability of those balances.  Our estimate of the allowance for doubtful accounts requires significant judgment about the timing, frequency and severity of collection losses, which affects the allowance and net income.  We recorded a provision for doubtful accounts of $1.7 million and $3.8 million for the six months ended June 30, 2010 and 2009, respectively.

Investments in Unconsolidated Affiliates

Initial investments in joint ventures that are in economic substance a capital contribution to the joint venture are recorded in an amount equal to our historical carryover basis in the real estate contributed. Initial investments in joint ventures that are in economic substance the sale of a portion of our interest in the real estate are accounted for as a contribution of real estate recorded in an amount equal to our historical carryover basis in the ownership percentage retained and as a sale of real estate with profit recognized to the extent of the other joint

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venturers’ interests in the joint venture. Profit recognition assumes that we have no commitment to reinvest with respect to the percentage of the real estate sold and the accounting requirements of the full accrual method are met.

We account for our investment in joint ventures where we own a non-controlling interest or where we are not the primary beneficiary of a variable interest entity using the equity method of accounting. Under the equity method, our cost of investment is adjusted for our share of equity in the earnings of the unconsolidated affiliate and reduced by distributions received. Generally, distributions of cash flows from operations and capital events are first made to partners to pay cumulative unpaid preferences on unreturned capital balances and then to the partners in accordance with the terms of the joint venture agreements.

Any differences between the cost of our investment in an unconsolidated affiliate and our underlying equity as reflected in the unconsolidated affiliate’s financial statements generally result from costs of our investment that are not reflected on the unconsolidated affiliate’s financial statements, capitalized interest on our investment and our share of development and leasing fees that are paid by the unconsolidated affiliate to us for development and leasing services provided to the unconsolidated affiliate during any development periods. The net difference between our investment in unconsolidated affiliates and the underlying equity of unconsolidated affiliates is generally amortized over a period of 40 years.

On a periodic basis, we assess whether there are any indicators that the fair value of our investments in unconsolidated affiliates may be impaired. An investment is impaired only if our estimate of the fair value of the investment is less than the carrying value of the investment, and such decline in value is deemed to be other than temporary. To the extent impairment has occurred, the loss is measured as the excess of the carrying amount of the investment over the fair value of the investment. Our estimates of fair value for each investment are based on a number of assumptions such as future leasing expectations, operating forecasts, discount rates and capitalization rates, among others.  These assumptions are subject to economic and market uncertainties including, but not limited to, demand for space, competition for tenants, changes in market rental rates, and operating costs. As these factors are difficult to predict and are subject to future events that may alter our assumptions, the fair values estimated in the impairment analyses may not be realized.

In June 2010, our 50.6% owned unconsolidated joint venture, Mall Shopping Center Company, sold Plaza del Sol in Del Rio, TX.  The joint venture recognized a gain of $1.2 million from the sale, of which our share was $0.1 million, net of the excess of our basis over our underlying equity in the amount of $0.6 million.

During the six months ended June 30, 2009, we recorded a non-cash impairment charge of $7.7 million related to our cost-method investment in Jinsheng due to a decline in expected future cash flows.  The projected decrease was a result of declining occupancy and sales due to the downturn of the real estate market in China in early 2009.  No impairments of investments in unconsolidated affiliates were incurred during the six months ended June 30, 2010.

Recent Accounting Pronouncements

Effective January 1, 2010, we adopted ASU No. 2010-06, Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements (“ASU 2010-06”).  ASU 2010-06 provides that significant transfers in or out of measurements classified as Levels 1 or 2 should be disclosed separately along with reasons for the transfers.  Information regarding purchases, sales, issuances and settlements related to measurements classified as Level 3 are also to be presented separately.  Existing disclosures have been updated to include fair value measurement disclosures for each class of assets and liabilities and information regarding the valuation techniques and inputs used to measure fair value in measurements classified as either Levels 2 or 3.  The guidance is effective for fiscal years beginning after December 15, 2009.  The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

Effective January 1, 2010, we adopted ASU No. 2009-16, Transfers and Servicing: Accounting for Transfers of Financial Assets (“ASU 2009-16”).  The guidance eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets and requires additional related disclosures.  The new accounting guidance is effective for fiscal years beginning after November 15, 2009.  The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

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Effective January 1, 2010, we adopted ASU No. 2009-17, Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“ASU 2009-17”).  ASU 2009-17 modifies how a company determines when an entity that is insufficiently capitalized or is not controlled through voting, or similar, rights should be consolidated.  The guidance clarifies that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.  This guidance requires an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity.  It also requires additional disclosure about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement.  The guidance is effective for fiscal years beginning after November 15, 2009.  The adoption of this guidance did not have an impact on our condensed consolidated financial statements.

On February 24, 2010, the FASB issued ASU No. 2010-09, Subsequent Events: Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”).  ASU 2010-09 amends the disclosure provision related to subsequent events by removing the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated.  The new accounting guidance was effective immediately and we adopted ASU No. 2010-09 upon the date of issuance.

Impact of Inflation

Deflation can result in a decline in general price levels, often caused by a decrease in the supply of money or credit.  The predominant effects of deflation are high unemployment, credit contraction and weakened consumer demand.  Restricted lending practices could impact our ability to obtain financings or refinancings for our properties and our tenants’ ability to obtain credit.  Decreases in consumer demand can have a direct impact on our tenants and the rents we receive.

During late 2009, the markets that were impacted by the economic crisis that arose primarily in the fourth quarter of 2008 seemed to stabilize and related bankruptcy activity started to decline.  The credit and investment markets have been slowly, but steadily, showing signs of improvement.  Retailers seem to have revised their business plans to better adapt to the current economic environment and are starting to report improving margins and profitability. The primary focus has begun to shift to planning for a market recovery.

During inflationary periods, substantially all of our tenant leases contain provisions designed to mitigate the impact of inflation.  These provisions include clauses enabling us to receive percentage rent based on tenants' gross sales, which generally increase as prices rise, and/or escalation clauses, which generally increase rental rates during the terms of the leases.  In addition, many of the leases are for terms of less than 10 years, which may provide us the opportunity to replace existing leases with new leases at higher base and/or percentage rent if rents of the existing leases are below the then existing market rate.  Most of the leases require the tenants to pay a fixed amount subject to annual increases for, or their share of, operating expenses, including common area maintenance, real estate taxes, insurance and certain capital expenditures, which reduces our exposure to increases in costs and operating expenses resulting from inflation.

Funds From Operations

Funds From Operations (“FFO”) is a widely used measure of the operating performance of real estate companies that supplements net income (loss) determined in accordance with GAAP. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) (computed in accordance with GAAP) excluding gains or losses on sales of operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests. Adjustments for unconsolidated partnerships and joint ventures and noncontrolling interests are calculated on the same basis. We define FFO allocable to common shareholders as defined above by NAREIT less dividends on preferred stock. Our method of calculating FFO allocable to common shareholders may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

We believe that FFO provides an additional indicator of the operating performance of our Properties without giving effect to real estate depreciation and amortization, which assumes the value of real estate assets declines predictably over time. Since values of well-maintained real estate assets have historically risen with market conditions, we believe that FFO enhances investors’ understanding of our operating performance. The use of FFO as an indicator of financial performance is influenced not only by the operations of our properties and interest rates, but also by our capital structure.

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We present both FFO of our Operating Partnership and FFO allocable to common shareholders, as we believe that both are useful performance measures.  We believe FFO of our Operating Partnership is a useful performance measure since we conduct substantially all of our business through our Operating Partnership and, therefore, it reflects the performance of the properties in absolute terms regardless of the ratio of ownership interests of our common shareholders and the noncontrolling interest in our Operating Partnership.  We believe FFO allocable to common shareholders is a useful performance measure because it is the performance measure that is most directly comparable to net income available to common shareholders.

In our reconciliation of net income (loss) available to common shareholders to FFO allocable to common shareholders that is presented below, we make an adjustment to add back noncontrolling interest in income of our Operating Partnership in order to arrive at FFO of our Operating Partnership.  We then apply a percentage to FFO of our Operating Partnership to arrive at FFO allocable to common shareholders. The percentage is computed by taking the weighted average number of common shares outstanding for the period and dividing it by the sum of the weighted average number of common shares and the weighted average number of Operating Partnership units outstanding during the period (excluding those operating partnership units held by subsidiaries of the Company which correspond to the outstanding common shares).

During the quarter ended June 30, 2010, we recorded a loss on impairment of real estate assets related to one operating property.  Considering the significance and nature of the impairment, we believe that it is important to identify the impact of the charge on our FFO measures for a reader to have a complete understanding of our results of operations.  Therefore, we have also presented our FFO measure excluding the impairment charge.

FFO does not represent cash flows from operations as defined by GAAP, is not necessarily indicative of cash available to fund all cash flow needs and should not be considered as an alternative to net income for purposes of evaluating our operating performance or to cash flow as a measure of liquidity.

FFO of the Operating Partnership decreased 28.7% to $68.6 million for the three months ended June 30, 2010 from $96.3 million for the same period in 2009 primarily as result of a $25.4 million non-cash impairment loss on real estate recognized in the second quarter of 2010.  Excluding the impairment charge, FFO of the Operating Partnership decreased 2.3% for the three months ended June 30, 2010, compared to the prior year quarter.  FFO of the Operating Partnership decreased 12.2% for the six months ended June 30, 2010 to $162.2 million compared to $184.7 million for the same period in 2009.  Excluding the impairment charge, FFO of the Operating Partnership increased 1.6% for the six months ended June 30, 2010, compared to the prior-year period.

The reconciliation of FFO to net income (loss) available to common shareholders is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Net income (loss) available to common shareholders	$	(7,242	)	$	8,137		$	3,686		$	9,849
Noncontrolling interest in earnings of Operating Partnership		(2,723	)		5,109			1,387			6,415
Depreciation and amortization expense of:
Consolidated properties		70,652			75,793			142,664			154,104
Unconsolidated affiliates		8,486			7,555			15,371			15,064
Non-real estate assets		(219	)		(243	)		(438	)		(490	)
Noncontrolling investors' share of depreciation and amortization		(311	)		(64	)		(456	)		(265	)
Loss on discontinued operations		-			12			-			72
Funds from operations of the operating partnership		68,643			96,299			162,214			184,749
Loss on impairment of real estate		25,435			-			25,435			-
Funds from operations of the operating partnership, excluding loss on impairment of real estate	$	94,078		$	96,299		$	187,649		$	184,749

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The reconciliations of FFO of the Operating Partnership to FFO allocable to the Company shareholders, including and excluding the loss on impairment of real estate, are as follows (in thousands):

	Three Months Ended  June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Funds from operations of the operating partnership	$	68,643		$	96,299		$	162,214		$	184,749
Percentage allocable to Company shareholders (1)		72.66	%		61.37	%		72.65	%		59.23	%
Funds from operations allocable to Company shareholders	$	49,876		$	59,099		$	117,848		$	109,427
Funds from operations of the operating partnership, excluding loss on impairment of real estate	$	94,078		$	96,299		$	187,649		$	184,749
Percentage allocable to Company shareholders (1)		72.66	%		61.37	%		72.65	%		59.23	%
Funds from operations allocable to Company shareholders, excluding loss on impairment of real estate	$	68,357		$	59,099		$	136,327		$	109,427

(1)  Represents the weighted average number of common shares outstanding for the period divided by the sum of the weighted average number of common shares and the weighted average number of operating partnership units outstanding during the period.

ITEM 3:  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risk exposures, including interest rate risk and foreign exchange rate risk. The following discussion regarding our risk management activities includes forward-looking statements that involve risk and uncertainties.  Estimates of future performance and economic conditions are reflected assuming certain changes in interest and foreign exchange rates.  Caution should be used in evaluating our overall market risk from the information presented below, as actual results may differ.  We employ various derivative programs to manage certain portions of our market risk associated with interest rates.  See Note 5 of the notes to consolidated financial statements for further discussions of the qualitative aspects of market risk, including derivative financial instrument activity.

Based on our proportionate share of consolidated and unconsolidated variable-rate debt at June 30, 2010, a 0.5% increase or decrease in interest rates on variable rate debt would increase or decrease annual cash flows by approximately $8.1 million and, after the effect of capitalized interest, annual earnings by approximately $8.1 million.

Based on our proportionate share of total consolidated and unconsolidated debt at June 30, 2010, a 0.5% increase in interest rates would decrease the fair value of debt by approximately $82.7 million, while a 0.5% decrease in interest rates would increase the fair value of debt by approximately $84.8 million.

ITEM 4:  Controls and Procedures

Disclosure Controls and Procedures

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of its effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of the end of the period covered by this quarterly report, an evaluation was performed under the supervision of our Chief Executive Officer and Chief Financial Officer and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective to ensure that information that we are required to disclose in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

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Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1:              Legal Proceedings

None

ITEM 1A.           Risk Factors

The following information updates the information disclosed in “Item 1A – Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2009, by providing information that is current as of June 30, 2010:

RISKS RELATED TO REAL ESTATE INVESTMENTS

Real property investments are subject to various risks, many of which are beyond our control, that could cause declines in the operating revenues and/or the underlying value of one or more of our Properties.

A number of factors may decrease the income generated by a retail shopping center property, including:

· National, regional and local economic climates, which may be negatively impacted by loss of jobs, production slowdowns, adverse weather conditions, natural disasters, acts of violence, war or terrorism, declines in residential real estate activity and other factors which tend to reduce consumer spending on retail goods.

· Adverse changes in levels of consumer spending, consumer confidence and seasonal spending (especially during the holiday season when many retailers generate a disproportionate amount of their annual profits).

· Local real estate conditions, such as an oversupply of, or reduction in demand for, retail space or retail goods, and the availability and creditworthiness of current and prospective tenants.

· Increased operating costs, such as increases in repairs and maintenance, real property taxes, utility rates and insurance premiums.

· Delays or cost increases associated with the opening of new or renovated properties, due to higher than estimated construction costs, cost overruns, delays in receiving zoning, occupancy or other governmental approvals, lack of availability of materials and labor, weather conditions, and similar factors which may be outside our ability to control.

· Perceptions by retailers or shoppers of the safety, convenience and attractiveness of the shopping center.

· The willingness and ability of the shopping center’s owner to provide capable management and maintenance services.

· The convenience and quality of competing retail properties and other retailing options, such as the Internet.

In addition, other factors may adversely affect the value of our Properties without affecting their current revenues, including:

· Adverse changes in governmental regulations, such as local zoning and land use laws, environmental regulations or local tax structures that could inhibit our ability to proceed with development, expansion, or renovation activities that otherwise would be beneficial to our Properties.

· Potential environmental or other legal liabilities that reduce the amount of funds available to us for investment in our Properties.

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· Any inability to obtain sufficient financing (including construction financing and permanent debt), or the inability to obtain such financing on commercially favorable terms, to fund repayment of maturing loans, new developments, acquisitions, and property expansions and renovations which otherwise would benefit our Properties.

· An environment of rising interest rates, which could negatively impact both the value of commercial real estate such as retail shopping centers and the overall retail climate.

Illiquidity of real estate investments could significantly affect our ability to respond to adverse changes in the performance of our Properties and harm our financial condition.

Substantially all of our total consolidated assets consist of investments in real properties.  Because real estate investments are relatively illiquid, our ability to quickly sell one or more properties in our portfolio in response to changing economic, financial and investment conditions is limited.  The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand for space, that are beyond our control.  We cannot predict whether we will be able to sell any property for the price or on the terms we set, or whether any price or other terms offered by a prospective purchaser would be acceptable to us.  We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.  In addition, current economic and capital market conditions might make it more difficult for us to sell properties or might adversely affect the price we receive for properties that we do sell, as prospective buyers might experience increased costs of debt financing or other difficulties in obtaining debt financing.

Moreover, there are some limitations under federal income tax laws applicable to REITs that limit our ability to sell assets.  In addition, because our Properties are generally mortgaged to secure our debts, we may not be able to obtain a release of a lien on a mortgaged property without the payment of the associated debt and/or a substantial prepayment penalty, which restricts our ability to dispose of a property, even though the sale might otherwise be desirable.  Furthermore, the number of prospective buyers interested in purchasing shopping centers is limited.  Therefore, if we want to sell one or more of our Properties, we may not be able to dispose of it in the desired time period and may receive less consideration than we originally invested in the Property.

Before a property can be sold, we may be required to make expenditures to correct defects or to make improvements.  We cannot assure you that we will have funds available to correct those defects or to make those improvements, and if we cannot do so, we might not be able to sell the property, or might be required to sell the property on unfavorable terms.  In acquiring a property, we might agree to provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as limitations on the amount of debt that can be placed or repaid on that property.  These factors and any others that would impede our ability to respond to adverse changes in the performance of our Properties could adversely affect our financial condition and results of operations.

We may elect not to proceed with certain development or expansion projects once they have been undertaken, resulting in charges that could have a material adverse effect on our results of operations for the period in which the charge is taken.

We intend to pursue development and expansion activities as opportunities arise. In connection with any development or expansion, we will incur various risks, including the risk that development or expansion opportunities explored by us may be abandoned for various reasons including, but not limited to, credit disruptions that require the Company to conserve its cash until the capital markets stabilize or alternative credit or funding arrangements can be made.  Developments or expansions also include the risk that construction costs of a project may exceed original estimates, possibly making the project unprofitable. Other risks include the risk that we may not be able to refinance construction loans which are generally with full recourse to us, the risk that occupancy rates and rents at a completed project will not meet projections and will be insufficient to make the project profitable, and the risk that we will not be able to obtain anchor, mortgage lender and property partner approvals for certain expansion activities.

When we elect not to proceed with a development opportunity, the development costs ordinarily are charged against income for the then-current period. Any such charge could have a material adverse effect on our results of operations for the period in which the charge is taken.

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Certain of our Properties are subject to ownership interests held by third parties, whose interests may conflict with ours and thereby constrain us from taking actions concerning these properties which otherwise would be in the best interests of the Company and our stockholders.

We own partial interests in 22 malls, twelve associated centers, six community centers and eight office buildings. We manage all but three of these properties.  Governor’s Square, Governor’s Plaza and Kentucky Oaks are all owned by joint ventures and are managed by a property manager that is affiliated with the third party managing general partner.  The property manager performs the property management and leasing services for these three Properties and receives a fee for its services. The managing partner of the Properties controls the cash flow distributions, although our approval is required for certain major decisions.

Where we serve as managing general partner (or equivalent) of the entities that own our Properties, we may have certain fiduciary responsibilities to the other owners of those entities. In certain cases, the approval or consent of the other owners is required before we may sell, finance, expand or make other significant changes in the operations of such Properties. To the extent such approvals or consents are required, we may experience difficulty in, or may be prevented from, implementing our plans with respect to expansion, development, financing or other similar transactions with respect to such Properties.

With respect to those Properties for which we do not serve as managing general partner (or equivalent), we do not have day-to-day operational control or control over certain major decisions, including leasing and the timing and amount of distributions, which could result in decisions by the managing entity that do not fully reflect our interests. This includes decisions relating to the requirements that we must satisfy in order to maintain our status as a REIT for tax purposes. However, decisions relating to sales, expansion and disposition of all or substantially all of the assets and financings are subject to approval by the Operating Partnership.

Bankruptcy of joint venture partners could impose delays and costs on us with respect to the jointly owned retail properties.

In addition to the possible effects on our joint ventures of a bankruptcy filing by us, the bankruptcy of one of the other investors in any of our jointly owned shopping centers could materially and adversely affect the relevant property or properties.  Under the bankruptcy laws, we would be precluded from taking some actions affecting the estate of the other investor without prior approval of the bankruptcy court, which would, in most cases, entail prior notice to other parties and a hearing in the bankruptcy court.  At a minimum, the requirement to obtain court approval may delay the actions we would or might want to take.  If the relevant joint venture through which we have invested in a property has incurred recourse obligations, the discharge in bankruptcy of one of the other investors might result in our ultimate liability for a greater portion of those obligations than we would otherwise bear.

We may incur significant costs related to compliance with environmental laws, which could have a material adverse effect on our results of operations, cash flows and the funds available to us to pay dividends.

Under various federal, state and local laws, ordinances and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal or remediation of petroleum, certain hazardous or toxic substances on, under or in such real estate. Such laws typically impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such substances. The costs of remediation or removal of such substances may be substantial. The presence of such substances, or the failure to promptly remove or remediate such substances, may adversely affect the owner’s or operator’s ability to lease or sell such real estate or to borrow using such real estate as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of such substances at the disposal or treatment facility, regardless of whether such facility is owned or operated by such person. Certain laws also impose requirements on conditions and activities that may affect the environment or the impact of the environment on human health. Failure to comply with such requirements could result in the imposition of monetary penalties (in addition to the costs to achieve compliance) and potential liabilities to third parties. Among other things, certain laws require abatement or removal of friable and certain non-friable asbestos-containing materials in the event of demolition or certain renovations or remodeling. Certain laws regarding asbestos-containing materials require building owners and lessees, among other things, to notify and train certain employees working in areas known or presumed to contain asbestos-containing materials. Certain laws also impose liability for release of asbestos-containing materials into the air and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with asbestos-containing materials. In connection with the ownership and operation of properties, we may be potentially liable for all or a portion of such costs or claims.

All of our Properties (but not properties for which we hold an option to purchase but do not yet own) have been subject to Phase I environmental assessments or updates of existing Phase I environmental assessments. Such assessments generally consisted of a visual inspection of the Properties, review of federal and state environmental databases and certain information regarding historic uses of the property and adjacent areas and the preparation and issuance of written reports. Some of the Properties contain, or contained, underground storage tanks used for storing petroleum products or wastes typically associated with automobile service or other operations conducted at the Properties. Certain Properties contain, or contained, dry-cleaning establishments utilizing solvents. Where believed to be warranted, samplings of building materials or subsurface investigations were undertaken. At certain Properties, where warranted by the conditions, we have developed and implemented an operations and maintenance program that establishes operating procedures with respect to

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asbestos-containing materials. The cost associated with the development and implementation of such programs was not material. We have also obtained environmental insurance coverage at certain of our Properties.

We believe that our Properties are in compliance in all material respects with all federal, state and local ordinances and regulations regarding the handling, discharge and emission of hazardous or toxic substances. As of June 30, 2010, we have recorded in our financial statements a liability of $2.8 million related to potential future asbestos abatement activities at our Properties which are not expected to have a material impact on our financial condition or results of operations. We have not been notified by any governmental authority, and are not otherwise aware, of any material noncompliance, liability or claim relating to hazardous or toxic substances in connection with any of our present or former Properties. Therefore, we have not recorded any liability related to hazardous or toxic substances. Nevertheless, it is possible that the environmental assessments available to us do not reveal all potential environmental liabilities. It is also possible that subsequent investigations will identify material contamination, that adverse environmental conditions have arisen subsequent to the performance of the environmental assessments, or that there are material environmental liabilities of which management is unaware. Moreover, no assurances can be given that (i) future laws, ordinances or regulations will not impose any material environmental liability or (ii) the current environmental condition of the Properties has not been or will not be affected by tenants and occupants of the Properties, by the condition of properties in the vicinity of the Properties or by third parties unrelated to us, the Operating Partnership or the relevant Property’s partnership.

Possible terrorist activity or other acts of violence could adversely affect our financial condition and results of operations.

Future terrorist attacks in the United States, and other acts of violence, including terrorism or war, might result in declining consumer confidence and spending, which could harm the demand for goods and services offered by our tenants and the values of our Properties, and might adversely affect an investment in our securities.  A decrease in retail demand could make it difficult for us to renew or re-lease our Properties at lease rates equal to or above historical rates and, to the extent our tenants are affected, could adversely affect their ability to continue to meet obligations under their existing leases.  Terrorist activities also could directly affect the value of our Properties through damage, destruction or loss.  Furthermore, terrorist acts might result in increased volatility in national and international financial markets, which could limit our access to capital or increase our cost of obtaining capital.

RISKS RELATED TO OUR BUSINESS AND THE MARKET FOR OUR STOCK

Declines in economic conditions, including increased volatility in the capital and credit markets, could adversely affect our business, results of operations and financial condition.

An economic recession can result in extreme volatility and disruption of our capital and credit markets.  The resulting economic environment may be affected by dramatic declines in the stock and housing markets, increases in foreclosures, unemployment and costs of living, as well as limited access to credit.  This economic situation can, and most often will, impact consumer spending levels, which can result in decreased revenues for our tenants and related decreases in the values of our Properties.  A sustained economic downward trend could impact our tenants’ ability to meet their lease obligations due to poor operating results, lack of liquidity, bankruptcy or other reasons.  Our ability to lease space and negotiate rents at advantageous rates could also be affected in this type of economic environment.  Additionally, access to capital and credit markets could be

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disrupted over an extended period, which may make it difficult to obtain the financing we may need for future growth and/or to meet our debt service obligations as they mature.  Any of these events could harm our business, results of operations and financial condition.

Both our June 2009 common stock offering and the payment of a portion of our common stock dividend for the first quarter of 2009 in shares of common stock were dilutive, and there may be future dilution of our common stock.

In June 2009, we completed a public offering of 66,630,000 shares of our newly-issued common stock.  In April 2009, we issued 4,754,355 shares of common stock in connection with the payment of a portion of our first quarter 2009 common stock dividend.  These transactions have had a dilutive effect on our earnings per share and funds from operations per share for the three and six months ended June 30, 2010.  We are not restricted by our organizational documents, contractual arrangements or otherwise from issuing additional common stock, including any securities that are convertible into or exchangeable or exercisable for, or that represent the right to receive, common stock or any substantially similar securities in the future.  Future sales or issuances of substantial amounts of our common stock may be at prices below the then-current market price of our common stock and may adversely impact the market price of our common stock.  Additionally, the market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market after our recent common stock offering or the perception that such sales could occur.

The market price of our common stock or other securities may fluctuate significantly.

The market price of our common stock or other securities may fluctuate significantly in response to many factors, including:

·   actual or anticipated variations in our operating results, funds from operations, cash flows or liquidity;

·   changes in our earnings estimates or those of analysts;

·   changes in our dividend policy;

·   impairment charges affecting the carrying value of one or more of our Properties or other assets;

·   publication of research reports about us, the retail industry or the real estate industry generally;

·   increases in market interest rates that lead purchasers of our securities to seek higher dividend or interest rate yields;

·   changes in market valuations of similar companies;

·   adverse market reaction to the amount of our outstanding debt at any time, the amount of our maturing debt in the near and medium term and our ability to refinance such debt and the terms thereof or our plans to incur additional debt in the future;

·   additions or departures of key management personnel;

·   actions by institutional security holders;

·   speculation in the press or investment community;

·   the occurrence of any of the other risk factors included in, or incorporated by reference in, this report; and

·   general market and economic conditions.

Many of the factors listed above are beyond our control.  Those factors may cause the market price of our common stock or other securities to decline significantly, regardless of our financial performance and condition and prospects.  It is impossible to provide any assurance that the market price of our common stock or other securities will not fall in the future, and it may be difficult for holders to sell such securities at prices they find attractive, or at all.

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The issuance of additional preferred stock may adversely affect the earnings per share available to common shareholders and amounts available to common shareholders for payments of dividends.

In March 2010, we completed an equity offering of 6,300,000 depositary shares, each representing 1/10th of a share of our 7.375% Series D Cumulative Redeemable Preferred Stock, having a liquidation preference of $25.00 per share.  The securities are redeemable at liquidation preference, plus accrued and unpaid dividends, at any time at the option of the Company.  The shares issued in the March 2010 offering will accrue dividends totaling approximately $11.6 million annually, decreasing earnings per share available to our common shareholders and the amounts available to our common shareholders for dividend payments.

We are not restricted by our organizational documents, contractual arrangements or otherwise from issuing additional preferred shares, including any securities that are convertible into or exchangeable or exercisable for, or that represent the right to receive, preferred stock or any substantially similar securities in the future.

Competition could adversely affect the revenues generated by our Properties, resulting in a reduction in funds available for distribution to our stockholders.

There are numerous shopping facilities that compete with our Properties in attracting retailers to lease space. In addition, retailers at our Properties face competition for customers from:

· discount shopping centers;

· outlet malls;

· wholesale clubs;

· direct mail;

· television shopping networks; and

· shopping via the internet.

Each of these competitive factors could adversely affect the amount of rents and tenant reimbursements that we are able to collect from our tenants, thereby reducing our revenues and the funds available for distribution to our stockholders.

We compete with many commercial developers, real estate companies and major retailers for prime development locations and for tenants.  New regional malls or other retail shopping centers with more convenient locations or better rents may attract tenants or cause them to seek more favorable lease terms at, or prior to, renewal.

Increased operating expenses and decreased occupancy rates may not allow us to recover the majority of our common area maintenance (CAM) and other operating expenses from our tenants, which could adversely affect our financial position, results of operations and funds available for future distributions.

Energy costs, repairs, maintenance and capital improvements to common areas of our Properties, janitorial services, administrative, property and liability insurance costs and security costs are typically allocable to our Properties’ tenants.  Our lease agreements typically provide that the tenant is liable for a portion of the CAM and other operating expenses.  While historically our lease agreements provided for variable CAM provisions, the majority of our current leases require an equal periodic tenant reimbursement amount for our cost recoveries which serves to fix our tenants’ CAM contributions to us.  In these cases, a tenant will pay a single specified rent amount, or a set expense reimbursement amount, subject to annual increases, regardless of the actual amount of operating expenses.  The tenant’s payment remains the same regardless of whether operating expenses increase or decrease, causing us to be responsible for any excess amounts or to benefit from any declines.  As a result, the CAM and tenant reimbursements that we receive may or may not allow us to recover a substantial portion of these operating costs.

Additionally, in the event that our Properties are not fully occupied, we would be required to pay the portion of any operating, redevelopment or renovation expenses allocable to the vacant space(s) that would otherwise typically be paid by the residing tenant(s).

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The loss of one or more significant tenants, due to bankruptcies or as a result of ongoing consolidations in the retail industry, could adversely affect both the operating revenues and value of our Properties.

Regional malls are typically anchored by well-known department stores and other significant tenants who generate shopping traffic at the mall. A decision by an anchor tenant or other significant tenant to cease operations at one or more Properties could have a material adverse effect on those Properties and, by extension, on our financial condition and results of operations. The closing of an anchor or other significant tenant may allow other anchors and/or tenants at an affected Property to terminate their leases, to seek rent relief and/or cease operating their stores or otherwise adversely affect occupancy at the Property. In addition, key tenants at one or more Properties might terminate their leases as a result of mergers, acquisitions, consolidations, dispositions or bankruptcies in the retail industry. The bankruptcy and/or closure of one or more significant tenants, if we are not able to successfully re-tenant the affected space, could have a material adverse effect on both the operating revenues and underlying value of the Properties involved, reducing the likelihood that we would be able to sell the Properties if we decided to do so, or we may be required to incur redevelopment costs in order to successfully obtain new anchors or other significant tenants when such vacancies exist.

Our Properties may be subject to impairment charges which can adversely affect our financial results.

We periodically evaluate long-lived assets to determine if there has been any impairment in their carrying values and record impairment losses if the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts or if there are other indicators of impairment.  If it is determined that an impairment has occurred, the amount of the impairment charge is equal to the excess of the asset’s carrying value over its estimated fair value, which could have a material adverse effect on our financial results in the accounting period in which the adjustment is made.  Our estimates of undiscounted cash flows expected to be generated by each property are based on a number of assumptions such as leasing expectations, operating budgets, estimated useful lives, future maintenance expenditures, intent to hold for use and capitalization rates.  These assumptions are subject to economic and market uncertainties including, but not limited to, demand for space, competition for tenants, changes in market rental rates and costs to operate each property. As these factors are difficult to predict and are subject to future events that may alter our assumptions, the future cash flows estimated in our impairment analyses may not be achieved.  During the second quarter of 2010, we recorded a non-cash loss on impairment of real estate of $25.4 million related to one of our Properties.

Inflation or deflation may adversely affect our financial condition and results of operations.

Increased inflation could have a pronounced negative impact on our mortgage and debt interest and general and administrative expenses, as these costs could increase at a rate higher than our rents.  Also, inflation may adversely affect tenant leases with stated rent increases, which could be lower than the increase in inflation at any given time. Inflation could also have an adverse effect on consumer spending which could impact our tenants' sales and, in turn, our percentage rents, where applicable.

Deflation can result in a decline in general price levels, often caused by a decrease in the supply of money or credit.  The predominant effects of deflation are high unemployment, credit contraction and weakened consumer demand.  Restricted lending practices could impact our ability to obtain financings or refinancings for our Properties and our tenants’ ability to obtain credit.  Decreases in consumer demand can have a direct impact on our tenants and the rents we receive.

Certain agreements with prior owners of Properties that we have acquired may inhibit our ability to enter into future sale or refinancing transactions affecting such Properties, which otherwise would be in the best interests of the Company and our stockholders.

Certain Properties that we originally acquired from third parties had unrealized gain attributable to the difference between the fair market value of such Properties and the third parties’ adjusted tax basis in the Properties immediately prior to their contribution of such Properties to the Operating Partnership pursuant to our acquisition. For this reason, a taxable sale by us of any of such Properties, or a significant reduction in the debt encumbering such Properties, could result in adverse tax consequences to the third parties who contributed these Properties in exchange for interests in the Operating Partnership. Under the terms of these transactions, we have generally agreed that we either will not sell or refinance such an acquired Property for a number of years in any transaction that would trigger adverse tax consequences for the parties from whom we acquired such Property, or else we will reimburse such parties for all or a portion of the additional taxes they are required to pay as a result of

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the transaction. Accordingly, these agreements may cause us not to engage in future sale or refinancing transactions affecting such Properties which otherwise would be in the best interests of the Company and our stockholders, or may increase the costs to us of engaging in such transactions.

Uninsured losses could adversely affect our financial condition, and in the future our insurance may not include coverage for acts of terrorism.

We carry a comprehensive blanket policy for general liability, property casualty (including fire, earthquake and flood) and rental loss covering all of the Properties, with specifications and insured limits customarily carried for similar properties. However, even insured losses could result in a serious disruption to our business and delay our receipt of revenue.  Furthermore, there are some types of losses, including lease and other contract claims, as well as some types of environmental losses, that generally are not insured or are not economically insurable.  If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a Property, as well as the anticipated future revenues from the Property.  If this happens, we, or the applicable Property’s partnership, may still remain obligated for any mortgage debt or other financial obligations related to the Property.

The general liability and property casualty insurance policies on our Properties currently include coverage for losses resulting from acts of terrorism, whether foreign or domestic. While we believe that the Properties are adequately insured in accordance with industry standards, the cost of general liability and property casualty insurance policies that include coverage for acts of terrorism has risen significantly subsequent to September 11, 2001. The cost of coverage for acts of terrorism is currently mitigated by the Terrorism Risk Insurance Act (“TRIA”). If TRIA is not extended beyond its current expiration date of December 31, 2014, we may incur higher insurance costs and greater difficulty in obtaining insurance that covers terrorist-related damages. Our tenants may also experience similar difficulties.

The U.S. federal income tax treatment of corporate dividends may make our stock less attractive to investors, thereby lowering our stock price.

The maximum U.S. federal income tax rate for qualified dividends received by individual taxpayers has been reduced generally from 38.6% to 15.0% (currently effective from January 1, 2003 through December 31, 2010). However, dividends payable by REITs are generally not eligible for such treatment. Although this legislation did not have a directly adverse effect on the taxation of REITs or dividends paid by REITs, the more favorable treatment for certain non-REIT dividends could cause individual investors to consider investments in non-REIT corporations as more attractive relative to an investment in a REIT, which could have an adverse impact on the market price of our stock.

RISKS RELATED TO DEBT AND FINANCIAL MARKETS

A deterioration of the capital and credit markets could adversely affect our ability to access funds and the capital needed to refinance debt or obtain new debt.

We are significantly dependent upon external financing to fund the growth of our business and ensure that we meet our debt servicing requirements. Our access to financing depends on the willingness of lending institutions to grant credit to us and conditions in the capital markets in general.  An economic recession may cause extreme volatility and disruption in the capital and credit markets.  We rely upon our largest credit facilities as sources of funding for numerous transactions.   Our access to these funds is dependent upon the ability of each of the participants to the credit facilities to meet their funding commitments.  When markets are volatile, access to capital and credit markets could be disrupted over an extended period of time and many financial institutions may not have the available capital to meet their previous commitments.  The failure of one or more significant participants to our credit facilities to meet their funding commitments could have an adverse affect on our financial condition and results of operations.  This may make it difficult to obtain the financing we may need for future growth and/or to meet our debt service obligations as they mature.  Although we have successfully obtained debt for refinancings of our maturing debt, acquisitions and the construction of new developments in the past, we cannot make any assurances as to whether we will be able to obtain debt in the future, or that the financing options available to us will be on favorable or acceptable terms.

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Our indebtedness is substantial and could impair our ability to obtain additional financing.

After payment of the underwriting discount and our other offering expenses, we received approximately $123.6 million in net proceeds, including accrued dividends, from the sale of additional shares of our 7.375% Series D Cumulative Redeemable Preferred Stock in our recent offering which closed on March 1, 2010.  These proceeds were used to reduce amounts outstanding under our current credit facilities and for general corporate purposes.

At June 30, 2010, our total share of consolidated and unconsolidated debt outstanding was approximately $6,019.7 million, which represented approximately 68.2% of our total market capitalization at that time, and our total share of consolidated and unconsolidated debt maturing in 2010, 2011 and 2012, giving effect to all maturity extensions that are available at our election, was approximately $219.6 million, $439.5 million and $966.3 million, respectively.  Our substantial leverage could have important consequences.  For example, it could:

·   result in the acceleration of a significant amount of debt for non-compliance with the terms of such debt or, if such debt contains cross-default or cross-acceleration provisions, other debt;

·   result in the loss of assets due to foreclosure or sale on unfavorable terms, which could create taxable income without accompanying cash proceeds;

·   materially impair our ability to borrow unused amounts under existing financing arrangements or to obtain additional financing or refinancing on favorable terms or at all;

·   require us to dedicate a substantial portion of our cash flow to paying principal and interest on our indebtedness, reducing the cash flow available to fund our business, to pay dividends, including those necessary to maintain our REIT qualification, or to use for other purposes;

·   increase our vulnerability to an economic downturn;

·   limit our ability to withstand competitive pressures; or

·   reduce our flexibility to respond to changing business and economic conditions.

If any of the foregoing occurs, our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected, and the trading price of our common stock or other securities could decline significantly.

Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distributions to our stockholders, and decrease our stock price, if investors seek higher yields through other investments.

An environment of rising interest rates could lead holders of our securities to seek higher yields through other investments, which could adversely affect the market price of our stock. One of the factors that may influence the price of our stock in public markets is the annual distribution rate we pay as compared with the yields on alternative investments. Numerous other factors, such as governmental regulatory action and tax laws, could have a significant impact on the future market price of our stock. In addition, increases in market interest rates could result in increased borrowing costs for us, which may adversely affect our cash flow and the amounts available for distributions to our stockholders.

As of June 30, 2010, our total share of consolidated and unconsolidated variable rate debt was $1,613.1 million.  Increases in interest rates will increase our cash interest payments on the variable rate debt we have outstanding from time to time.  If we do not have sufficient cash flow from operations, we might not be able to make all required payments of principal and interest on our debt, which could result in a default or have a material adverse effect on our financial condition and results of operations, and which might adversely affect our cash flow and our ability to make distributions to shareholders.  These significant debt payment obligations might also require us to use a significant portion of our cash flow from operations to make interest and principal payments on our debt rather than for other purposes such as working capital, capital expenditures or distributions on our common equity.

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Certain of our credit facilities, the loss of which could have a material, adverse impact on our financial condition and results of operations, are conditioned upon the Operating Partnership continuing to be managed by certain members of its current senior management and by such members of senior management continuing to own a significant direct or indirect equity interest in the Operating Partnership.

Certain of the Operating Partnership’s lines of credit are conditioned upon the Operating Partnership continuing to be managed by certain members of its current senior management and by such members of senior management continuing to own a significant direct or indirect equity interest in the Operating Partnership (including both units of limited partnership in the Operating Partnership and shares of our common stock owned by such members of senior management). If the failure of one or more of these conditions resulted in the loss of these credit facilities and we were unable to obtain suitable replacement financing, such loss could have a material, adverse impact on our financial position and results of operations.

Our hedging arrangements might not be successful in limiting our risk exposure, and we might be required to incur expenses in connection with these arrangements or their termination that could harm our results of operations or financial condition.

From time to time, we use interest rate hedging arrangements to manage our exposure to interest rate volatility, but these arrangements might expose us to additional risks, such as requiring that we fund our contractual payment obligations under such arrangements in relatively large amounts or on short notice.  Developing an effective interest rate risk strategy is complex, and no strategy can completely insulate us from risks associated with interest rate fluctuations.  We cannot assure you that our hedging activities will have a positive impact on our results of operations or financial condition.  We might be subject to additional costs, such as transaction fees or breakage costs, if we terminate these arrangements.  In addition, although our interest rate risk management policy establishes minimum credit ratings for counterparties, this does not eliminate the risk that a counterparty might fail to honor its obligations, particularly given current market conditions.

The covenants in our credit facilities might adversely affect us.

Our credit facilities require us to satisfy certain affirmative and negative covenants and to meet numerous financial tests.  The financial covenants under the credit facilities require, among other things, that our Debt to Gross Asset Value ratio, as defined in the agreements to our credit facilities, be less than 65%, that our Interest Coverage ratio, as defined, be greater than 1.75, and that our Debt Service Coverage ratio, as defined, be greater than 1.50.  Compliance with each of these ratios is dependent upon our financial performance.  The Debt to Gross Asset Value ratio is based, in part, on applying a capitalization rate to our earnings before income taxes, depreciation and amortization (“EBITDA”), as defined in the agreements to our credit facilities.  Based on this calculation method, decreases in EBITDA would result in an increased Debt to Gross Asset Value ratio, although overall debt levels remain constant.  As of June 30, 2010, the Debt to Gross Asset Value ratio was 54% and we were in compliance with all other covenants related to our credit facilities.

RISKS RELATED TO GEOGRAPHIC CONCENTRATIONS

Since our Properties are located principally in the Southeastern and Midwestern United States, our financial position, results of operations and funds available for distribution to shareholders are subject generally to economic conditions in these regions.

Our Properties are located principally in the southeastern and midwestern United States. Our Properties located in the southeastern United States accounted for approximately 47.5% of our total revenues from all Properties for the six months ended June 30, 2010 and currently include 44 malls, 20 associated centers, nine community centers and 18 office buildings. Our Properties located in the midwestern United States accounted for approximately 33.3% of our total revenues from all Properties for the six months ended June 30, 2010 and currently include 26 malls and four associated centers. Our results of operations and funds available for distribution to shareholders therefore will be subject generally to economic conditions in the southeastern and midwestern United States. While we already have Properties located in eight states across the southwestern, northeastern and western regions, we will continue to look for opportunities to geographically diversify our portfolio in order to minimize dependency on any particular region; however, the expansion of the portfolio through both acquisitions and developments is contingent on many factors including consumer demand, competition and economic conditions.

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Our financial position, results of operations and funds available for distribution to shareholders could be adversely affected by any economic downturn affecting the operating results at our Properties in the St. Louis, MO, Nashville, TN, Kansas City (Overland Park), KS, Madison, WI, and Chattanooga, TN metropolitan areas, which are our five largest markets.

Our Properties located in the St. Louis, MO, Nashville, TN, Kansas City (Overland Park), KS, Madison, WI, and Chattanooga, TN metropolitan areas accounted for approximately 9.8%, 3.8%, 3.0%, 2.8% and 2.6%, respectively, of our total revenues for the six months ended June 30, 2010. No other market accounted for more than 2.6% of our total revenues for the six months ended June 30, 2010. Our financial position and results of operations will therefore be affected by the results experienced at Properties located in these metropolitan areas.

RISKS RELATED TO INTERNATIONAL INVESTMENTS

Ownership interests in investments or joint ventures outside the United States present numerous risks that differ from those of our domestic investments.

We have an investment in a mall operating and real estate development company in China that is currently immaterial to our consolidated financial position.  International development and ownership activities yield additional risks that differ from those related to our domestic properties and operations.  These additional risks include, but are not limited to:

·   Impact of adverse changes in exchange rates of foreign currencies;

·   Difficulties in the repatriation of cash and earnings;

·   Differences in managerial styles and customs;

·   Changes in applicable laws and regulations in the United States that affect foreign operations;

·   Changes in foreign political, legal and economic environments; and

·   Differences in lending practices.

Our international activities are currently limited in their scope.  However, should our investments in international joint ventures or investments grow, these additional risks could increase in significance and adversely affect our results of operations.

RISKS RELATED TO DIVIDENDS

We may change the dividend policy for our common stock in the future.

We issued 4,754,355 shares of common stock for a portion of our dividend payment for the first quarter of 2009.  All subsequent dividend payments through the date of issuance of this report have been paid in cash.  Depending upon our liquidity needs, we reserve the right to pay any or all of a dividend in a combination of cash and shares of common stock, in accordance with applicable revenue procedures of the IRS.  In the event that we pay a portion of our dividends in shares of our common stock pursuant to such procedures, taxable U.S. stockholders would be required to pay tax on the entire amount of the dividend, including the portion paid in shares of common stock, in which case such stockholders may have to use cash from other sources to pay such tax.  If a U.S. stockholder sells the common stock it receives as a dividend in order to pay its taxes, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our common stock at the time of the sale.  Furthermore, with respect to non-U.S. stockholders, we may be required to withhold federal tax with respect to our dividends, including dividends that are paid in common stock.  In addition, if a significant number of our stockholders sell shares of our common stock in order to pay taxes owed on dividends, such sales would put downward pressure on the market price of our common stock.

The decision to declare and pay dividends on our common stock in the future, as well as the timing, amount and composition of any such future dividends, will be at the sole discretion of our Board of Directors and will depend on our earnings, taxable income, funds from operations, liquidity, financial condition, capital requirements, contractual prohibitions or other limitations under our indebtedness and preferred stock, the annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended (the

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“Internal Revenue Code”), Delaware law and such other factors as our Board of Directors deems relevant.  Any dividends payable will be determined by our Board of Directors based upon the circumstances at the time of declaration.  Any change in our dividend policy could have a material adverse effect on the market price of our common stock.

RISKS RELATED TO FEDERAL INCOME TAX LAWS

We conduct a portion of our business through taxable REIT subsidiaries, which are subject to certain tax risks.

We have established several taxable REIT subsidiaries including our management company.  Despite our qualification as a REIT, our taxable REIT subsidiaries must pay income tax on their taxable income.  In addition, we must comply with various tests to continue to qualify as a REIT for federal income tax purposes, and our income from and investments in our taxable REIT subsidiaries generally do not constitute permissible income and investments for these tests.  While we will attempt to ensure that our dealings with our taxable REIT subsidiaries will not adversely affect our REIT qualification, we cannot provide assurance that we will successfully achieve that result.  Furthermore, we may be subject to a 100% penalty tax, or our taxable REIT subsidiaries may be denied deductions, to the extent our dealings with our taxable REIT subsidiaries are not deemed to be arm’s length in nature.

If we fail to qualify as a REIT in any taxable year, our funds available for distribution to stockholders will be reduced.

We intend to continue to operate so as to qualify as a REIT under the Internal Revenue Code. Although we believe that we are organized and operate in such a manner, no assurance can be given that we currently qualify and in the future will continue to qualify as a REIT. Such qualification involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to qualify. In addition, no assurance can be given that legislation, new regulations, administrative interpretations or court decisions will not significantly change the tax laws with respect to qualification or its corresponding federal income tax consequences. Any such change could have a retroactive effect.

If in any taxable year we were to fail to qualify as a REIT, we would not be allowed a deduction for distributions to stockholders in computing our taxable income and we would be subject to federal income tax on our taxable income at regular corporate rates. Unless entitled to relief under certain statutory provisions, we also would be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. As a result, the funds available for distribution to our stockholders would be reduced for each of the years involved. This would likely have a significant adverse effect on the value of our securities and our ability to raise additional capital. In addition, we would no longer be required to make distributions to our stockholders. We currently intend to operate in a manner designed to qualify as a REIT. However, it is possible that future economic, market, legal, tax or other considerations may cause our Board of Directors, with the consent of a majority of our stockholders, to revoke the REIT election.

Any issuance or transfer of our capital stock to any person in excess of the applicable limits on ownership necessary to maintain our status as a REIT would be deemed void ab initio, and those shares would automatically be transferred to a non-affiliated charitable trust.

To maintain our status as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) at any time during the last half of a taxable year. Our certificate of incorporation generally prohibits ownership of more than 6% of the outstanding shares of our capital stock by any single stockholder determined by vote, value or number of shares (other than Charles Lebovitz, Executive Chairman of our board of directors and our former Chief Executive Officer, David Jacobs, Richard Jacobs and their affiliates under the Internal Revenue Code’s attribution rules). The affirmative vote of 66 2/3% of our outstanding voting stock is required to amend this provision.

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Our board of directors may, subject to certain conditions, waive the applicable ownership limit upon receipt of a ruling from the IRS or an opinion of counsel to the effect that such ownership will not jeopardize our status as a REIT. Absent any such waiver, however, any issuance or transfer of our capital stock to any person in excess of the applicable ownership limit or any issuance or transfer of shares of such stock which would cause us to be beneficially owned by fewer than 100 persons, will be null and void and the intended transferee will acquire no rights to the stock. Instead, such issuance or transfer with respect to that number of shares that would be owned by the transferee in excess of the ownership limit provision would be deemed void ab initio and those shares would automatically be transferred to a trust for the exclusive benefit of a charitable beneficiary to be designated by us, with a trustee designated by us, but who would not be affiliated with us or with the prohibited owner. Any acquisition of our capital stock and continued holding or ownership of our capital stock constitutes, under our certificate of incorporation, a continuous representation of compliance with the applicable ownership limit.

In order to maintain our status as a REIT and avoid the imposition of certain additional taxes under the Internal Revenue Code, we must satisfy minimum requirements for distributions to shareholders, which may limit the amount of cash we might otherwise have been able to retain for use in growing our business.

To maintain our status as a REIT under the Internal Revenue Code, we generally will be required each year to distribute to our stockholders at least 90% of our taxable income after certain adjustments. However, to the extent that we do not distribute all of our net capital gains or distribute at least 90% but less than 100% of our REIT taxable income, as adjusted, we will be subject to tax on the undistributed amount at regular corporate tax rates, as the case may be. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which certain distributions paid by us during each calendar year are less than the sum of 85% of our ordinary income for such calendar year, 95% of our capital gain net income for the calendar year and any amount of such income that was not distributed in prior years. In the case of property acquisitions, including our initial formation, where individual Properties are contributed to our Operating Partnership for Operating Partnership units, we have assumed the tax basis and depreciation schedules of the entities’ contributing Properties. The relatively low tax basis of such contributed Properties may have the effect of increasing the cash amounts we are required to distribute as dividends, thereby potentially limiting the amount of cash we might otherwise have been able to retain for use in growing our business. This low tax basis may also have the effect of reducing or eliminating the portion of distributions made by us that are treated as a non-taxable return of capital.

Complying with REIT requirements might cause us to forego otherwise attractive opportunities.

In order to qualify as a REIT for U.S. federal income tax purposes, we must satisfy tests concerning, among other things, our sources of income, the nature of our assets, the amounts we distribute to our shareholders and the ownership of our stock.  We may also be required to make distributions to our shareholders at disadvantageous times or when we do not have funds readily available for distribution.  Thus, compliance with REIT requirements may cause us to forego opportunities we would otherwise pursue.  In addition, the REIT provisions of the Internal Revenue Code impose a 100% tax on income from “prohibited transactions.”  “Prohibited transactions” generally include sales of assets that constitute inventory or other property held for sale in the ordinary course of business, other than foreclosure property.  This 100% tax could impact our desire to sell assets and other investments at otherwise opportune times if we believe such sales could be considered “prohibited transactions.”

Our holding company structure makes us dependent on distributions from the Operating Partnership.

Because we conduct our operations through the Operating Partnership, our ability to service our debt obligations and pay dividends to our shareholders is strictly dependent upon the earnings and cash flows of the Operating Partnership and the ability of the Operating Partnership to make distributions to us.  Under the Delaware Revised Uniform Limited Partnership Act, the Operating Partnership is prohibited from making any distribution to us to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the Operating Partnership (other than some non-recourse liabilities and some liabilities to the partners) exceed the fair value of the assets of the Operating Partnership.  Additionally, the terms of some of the debt to which our Operating Partnership is a party may limit its ability to make some types of payments and other distributions to us.  This in turn may limit our ability to make some types of payments, including payment of dividends on our outstanding capital stock, unless we meet certain financial tests or such payments or dividends are required to maintain our qualification as a REIT or to avoid the imposition of any federal income or excise tax

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on undistributed income.  Any inability to make cash distributions from the Operating Partnership could jeopardize our ability to pay dividends on our outstanding shares of capital stock and to maintain qualification as a REIT.

RISKS RELATED TO OUR ORGANIZATIONAL STRUCTURE

The ownership limit described above, as well as certain provisions in our amended and restated certificate of incorporation and bylaws, and certain provisions of Delaware law, may hinder any attempt to acquire us.

There are certain provisions of Delaware law, our amended and restated certificate of incorporation, our bylaws, and other agreements to which we are a party that may have the effect of delaying, deferring or preventing a third party from making an acquisition proposal for us.  These provisions may also inhibit a change in control that some, or a majority, of our stockholders might believe to be in their best interest or that could give our stockholders the opportunity to realize a premium over the then-prevailing market prices for their shares. These provisions and agreements are summarized as follows:

· The Ownership Limit – As described above, to maintain our status as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include certain entities) during the last half of a taxable year. Our certificate of incorporation generally prohibits ownership of more than 6% of the outstanding shares of our capital stock by any single stockholder determined by value (other than Charles Lebovitz, David Jacobs, Richard Jacobs and their affiliates under the Internal Revenue Code’s attribution rules). In addition to preserving our status as a REIT, the ownership limit may have the effect of precluding an acquisition of control of us without the approval of our board of directors.

· Classified Board of Directors; Removal for Cause – Our certificate of incorporation provides for a board of directors divided into three classes, with one class elected each year to serve for a three-year term. As a result, at least two annual meetings of stockholders may be required for the stockholders to change a majority of our board of directors. In addition, our stockholders can only remove directors for cause and only by a vote of 75% of the outstanding voting stock. Collectively, these provisions make it more difficult to change the composition of our board of directors and may have the effect of encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts.

· Advance Notice Requirements for Stockholder Proposals – Our bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures generally require advance written notice of any such proposals, containing prescribed information, to be given to our Secretary at our principal executive offices not less than 60 days nor more than 90 days prior to the meeting.

· Vote Required to Amend Bylaws – A vote of 66 2/3% of our outstanding voting stock (in addition to any separate approval that may be required by the holders of any particular class of stock) is necessary for stockholders to amend our bylaws.

· Delaware Anti-Takeover Statute – We are a Delaware corporation and are subject to Section 203 of the Delaware General Corporation Law. In general, Section 203 prevents an “interested stockholder” (defined generally as a person owning 15% or more of a company’s outstanding voting stock) from engaging in a “business combination” (as defined in Section 203) with us for three years following the date that person becomes an interested stockholder unless:

(a) before that person became an interested holder, our board of directors approved the transaction in which the interested holder became an interested stockholder or approved the business combination;

(b) upon completion of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owns 85% of our voting stock outstanding at the time the transaction commenced (excluding stock held by directors who are also officers and by

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employee stock plans that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer); or

(c) following the transaction in which that person became an interested stockholder, the business combination is approved by our board of directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock not owned by the interested stockholder.

Under Section 203, these restrictions also do not apply to certain business combinations proposed by an interested stockholder following the announcement or notification of certain extraordinary transactions involving us and a person who was not an interested stockholder during the previous three years or who became an interested stockholder with the approval of a majority of our directors, if that extraordinary transaction is approved or not opposed by a majority of the directors who were directors before any person became an interested stockholder in the previous three years or who were recommended for election or elected to succeed such directors by a majority of directors then in office.

Certain ownership interests held by members of our senior management may tend to create conflicts of interest between such individuals and the interests of the Company and our Operating Partnership.

· Tax Consequences of the Sale or Refinancing of Certain Properties – Since certain of our Properties had unrealized gain attributable to the difference between the fair market value and adjusted tax basis in such Properties immediately prior to their contribution to the Operating Partnership, a taxable sale of any such Properties, or a significant reduction in the debt encumbering such Properties, could cause adverse tax consequences to the members of our senior management who owned interests in our predecessor entities. As a result, members of our senior management might not favor a sale of a property or a significant reduction in debt even though such a sale or reduction could be beneficial to us and the Operating Partnership. Our bylaws provide that any decision relating to the potential sale of any property that would result in a disproportionately higher taxable income for members of our senior management than for us and our stockholders, or that would result in a significant reduction in such property’s debt, must be made by a majority of the independent directors of the board of directors. The Operating Partnership is required, in the case of such a sale, to distribute to its partners, at a minimum, all of the net cash proceeds from such sale up to an amount reasonably believed necessary to enable members of our senior management to pay any income tax liability arising from such sale.

· Interests in Other Entities; Policies of the Board of Directors – Certain entities owned in whole or in part by members of our senior management, including the construction company that built or renovated most of our properties, may continue to perform services for, or transact business with, us and the Operating Partnership. Furthermore, certain property tenants are affiliated with members of our senior management. Accordingly, although our bylaws provide that any contract or transaction between us or the Operating Partnership and one or more of our directors or officers, or between us or the Operating Partnership and any other entity in which one or more of our directors or officers are directors or officers or have a financial interest, must be approved by our disinterested directors or stockholders after the material facts of the relationship or interest of the contract or transaction are disclosed or are known to them, these affiliations could nevertheless create conflicts between the interests of these members of senior management and the interests of the Company, our shareholders and the Operating Partnership in relation to any transactions between us and any of these entities.

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ITEM 2:                      Unregistered Sales of Equity Securities and Use of Proceeds

(c)  The following table presents information with respect to repurchases of common stock made by us during the three months ended June 30, 2010:

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share (2)	Total Number of Shares Purchased as Part of a Publicly Announced Plan	Maximum Number of Shares that May Yet Be Purchased Under the Plan
April 1–30, 2010	—	$	—	—	—
May 1–31, 2010	10,668	$	13.98	—	—
June 1–30, 2010	159	$	14.20	—	—
Total	10,827	$	13.98	—	—

(1) Represents shares surrendered to the Company by employees to satisfy federal and state income tax withholding requirements related to the vesting of shares of restricted stock.

(2) Represents the market value of the common stock on the vesting date for the shares of restricted stock, which was used to determine the number of shares required to be surrendered to satisfy income tax withholding requirements.

ITEM 3: Defaults Upon Senior Securities

None

ITEM 4: (Removed and Reserved)

ITEM 5: Other Information

(a)   On July 29, 2010, we extended and modified our $105.0 million secured credit facility with First Tennessee Bank NA, as administrative agent.  The revised facility reflects an extension of the maturity of the facility from June 2011 to June 2012.  Amounts outstanding thereunder will continue to bear interest at an annual rate equal to one-month, three-month, six-month or one-year LIBOR (as selected by us), subject to a floor of 1.50%, plus 300 basis points.  At June 1, 2011, the total capacity on this line of credit could decrease to $82.5 million due to an exiting participant lender that has provided $22,500 of this line’s total capacity.  The Company is currently negotiating the terms with a potential replacement lender and believes that an agreement with a replacement lender or lenders will be executed prior to that time.

ITEM 6: Exhibits

The Exhibit Index attached to this report is incorporated by reference into this Item 6.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CBL & ASSOCIATES PROPERTIES, INC.

/s/ John N. Foy

_____________________________________

John N. Foy

Vice Chairman of the Board, Chief Financial

Officer, Treasurer and Secretary

(Authorized Officer and Principal Financial Officer)

Date: August 9, 2010

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INDEX TO EXHIBITS

Exhibit Number	Description
10.5.9	CBL & Associates Properties, Inc. Second Amended and Restated Stock Incentive Plan.*
10.15.3	Amended and Restated Loan Agreement between the Operating Partnership, The Lakes Mall, LLC, Lakeshore / Sebring Limited Partnership and First Tennessee Bank National Association, dated July 29, 2010.
12.1	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends.
31.1	Certification pursuant to Securities Exchange Act Rule 13a-14(a) by the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification pursuant to Securities Exchange Act Rule 13a-14(a) by the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification pursuant to Securities Exchange Act Rule 13a-14(b) by the Chief Executive Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to Securities Exchange Act Rule 13a-14(b) by the Chief Financial Officer as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 * Effective May 4, 2010, in conjunction with an immaterial amendment waiving the transfer restrictions imposed on common stock granted to Non-Employee Directors in the event of death or disability, the Company’s Board of Directors and Compensation Committee also approved a restatement of the Stock Incentive Plan to incorporate and clearly reflect the changes made by this and all prior amendments, as well as to reflect the antidilution adjustments made in connection with the two-for-one stock split of the Company’s Common Stock which was effected in the form of a stock dividend as of June 15, 2005.

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