UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

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

Commission File Number:
1-12358 (Colonial Properties Trust)
0-20707 (Colonial Realty Limited Partnership)

COLONIAL PROPERTIES TRUST
COLONIAL REALTY LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

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

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

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

Not applicable
(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.

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

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

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

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

		Colonial Properties Trust                   Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
						(Do not check if smaller reporting company)
		Colonial Realty Limited Partnership Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
						(Do not check if smaller reporting company)

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

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

As of May 5, 2010, Colonial Properties Trust had 70,083,087 Common Shares of Beneficial Interest outstanding.

 

 

COLONIAL PROPERTIES TRUST
COLONIAL REALTY LIMITED PARTNERSHIP
INDEX TO FORM 10-Q

		Page
PART I: FINANCIAL INFORMATION
Item 1. Consolidated Condensed Financial Statements:
Colonial Properties Trust
Consolidated Condensed Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009			4
Consolidated Condensed Statements of Operations for the Three Months ended March 31, 2010 and 2009 (unaudited)			5
Consolidated Condensed Statements of Cash Flows for the Three Months ended March 31, 2010 and 2009 (unaudited)			6
Consolidated Statements of Shareholders’ Equity for the Three Months ended March 31, 2010 and 2009 (unaudited)			7
Notes to Consolidated Condensed Financial Statements (unaudited)			8
Colonial Realty Limited Partnership
Consolidated Condensed Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009			25
Consolidated Condensed Statements of Operations for the Three Months ended March 31, 2010 and 2009 (unaudited)			26
Consolidated Condensed Statements of Cash Flows for the Three Months ended March 31, 2010 and 2009 (unaudited)			27
Consolidated Statements of Partners’ Equity for the Three Months ended March 31, 2010 and 2009 (unaudited)			28
Notes to Consolidated Condensed Financial Statements (unaudited)			29
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			46
Item 3. Quantitative and Qualitative Disclosures about Market Risk			61
Item 4. Controls and Procedures			62
PART II: OTHER INFORMATION
Item 1A. Risk Factors			62
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			63
Item 6. Exhibits			63
SIGNATURES			64
EXHIBIT INDEX			65
Exhibit 10.1
Exhibit 12.1
Exhibit 12.2
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 31.4
Exhibit 32.1
Exhibit 32.2
Exhibit 32.3
Exhibit 32.4

Explanatory Note

This Form 10-Q includes information with respect to both Colonial Properties Trust (the “Trust”) and Colonial Realty Limited Partnership (“CRLP”), of which the Trust is the sole general partner and in which the Trust owned an 89.5% limited partner interest as of March 31, 2010. The Trust conducts all of its business and owns all of its properties through CRLP and CRLP’s various subsidiaries. Separate financial statements and accompanying notes are provided for each of the Trust and CRLP. Except as specifically noted otherwise, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is presented as a single discussion with respect to both the Trust and CRLP since the Trust conducts all of its business and owns all of its properties through CRLP and CRLP’s various subsidiaries.

COLONIAL PROPERTIES TRUST

						(audited)
		March 31, 2010				December 31, 2009
ASSETS
Land, buildings & equipment		$	3,211,973			$	3,210,350
Undeveloped land and construction in progress			276,009				237,100
Less: Accumulated depreciation			(549,677	)			(519,728	)
Real estate assets held for sale, net			33,950				65,022
Net real estate assets			2,972,255				2,992,744
Cash and cash equivalents			3,762				4,590
Restricted cash			7,752				7,952
Accounts receivable, net			34,397				33,934
Notes receivable			17,366				22,208
Prepaid expenses			16,916				16,503
Deferred debt and lease costs			21,687				22,560
Investment in partially-owned entities			15,693				17,422
Other assets			52,740				54,719
Total assets		$	3,142,568			$	3,172,632
LIABILITIES AND EQUITY
Notes and mortgages payable		$	1,360,674			$	1,393,797
Unsecured credit facility			312,632				310,546
Total debt			1,673,306				1,704,343
Accounts payable			26,171				28,299
Accrued interest			17,809				13,133
Accrued expenses			18,528				26,142
Other liabilities			12,350				15,054
Total liabilities			1,748,164				1,786,971
Redeemable Noncontrolling interest:
Common units			137,695				133,537
Equity:
Preferred shares of beneficial interest, $.01 par value, 20,000,000 shares authorized: 8 1/8% Series D Cumulative Redeemable Preferred Shares of Beneficial Interest, liquidation preference $25 per depositary share, 4,004,735 depositary shares (Liquidation value $100,118,000) issued and outstanding at March 31, 2010 and December 31, 2009, respectively			4				4
Common shares of beneficial interest, $.01 par value, 125,000,000 shares authorized; 74,932,871 and 71,989,227 shares issued at March 31, 2010 and December 31, 2009, respectively			749				720
Additional paid-in capital			1,787,289				1,760,362
Cumulative earnings			1,287,706				1,296,188
Cumulative distributions			(1,766,877	)			(1,753,015	)
Noncontrolling interest:
Limited partners’ noncontrolling interest			844				985
7 1/4% Series B Cumulative Redeemable Preferred Units			100,000				100,000
Treasury shares, at cost; 5,623,150 shares at March 31, 2010 and December 31, 2009			(150,163	)			(150,163	)
Accumulated other comprehensive loss			(2,843	)			(2,957	)
Total equity			1,256,709				1,252,124
Total liabilities and equity		$	3,142,568			$	3,172,632

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

COLONIAL PROPERTIES TRUST

		Three Months Ended
		March 31,
		2010				2009
Revenues:
Minimum rent		$	73,482			$	70,239
Tenant recoveries			2,789				1,066
Other property related revenue			11,544				9,500
Construction revenues			—				35
Other non-property related revenue			2,898				3,455
Total revenue			90,713				84,295
Expenses:
Property operating expenses			25,419				22,469
Taxes, licenses and insurance			11,059				10,976
Construction expenses			—				34
Property management expenses			1,807				1,918
General and administrative expenses			4,807				4,382
Management fees and other expenses			2,673				4,217
Restructuring charges			—				812
Investment and development			3				165
Depreciation			30,279				27,785
Amortization			2,224				873
Impairment and other losses			783				1,054
Total operating expenses			79,054				74,685
Income from operations			11,659				9,610
Other income (expense):
Interest expense			(20,901	)			(20,432	)
Debt cost amortization			(1,185	)			(1,303	)
Gains on retirement of debt			28				25,319
Interest income			393				301
Income (loss) from partially-owned investments			270				(650	)
Loss on hedging activities			—				(1,063	)
(Loss) gain from sales of property, net of income taxes of $0 (1Q10) and $3,177 (1Q09)			(7	)			5,380
Income taxes and other			(249	)			3,090
Total other income (expense)			(21,651	)			10,642
(Loss) income from continuing operations			(9,992	)			20,252
(Loss) income from discontinued operations			(32	)			541
(Loss) gain on disposal of discontinued operations, net of income taxes of $0 (1Q10) and $26 (1Q09)			(35	)			45
(Loss) income from discontinued operations			(67	)			586
Net (loss) income			(10,059	)			20,838
Noncontrolling interest
Continuing Operations
Noncontrolling interest in CRLP — common unitholders			1,492				(2,368	)
Noncontrolling interest in CRLP — preferred unitholders			(1,813	)			(1,813	)
Noncontrolling interest of limited partners			82				(1,009	)
Discontinued Operations
Noncontrolling interest in CRLP from discontinued operations			8				(163	)
Noncontrolling interest of limited partners			(5	)			468
Income attributable to noncontrolling interest			(236	)			(4,885	)
Net (loss) income attributable to parent company			(10,295	)			15,953
Dividends to preferred shareholders			(2,034	)			(2,073	)
Preferred share issuance costs write-off, net of discount			—				(5	)
Net (loss) income available to common shareholders		$	(12,329	)		$	13,875
Net (loss) income per common share — Basic:
(Loss) income from continuing operations		$	(0.19	)		$	0.27
Income from discontinued operations			—				0.02
Net (loss) income per common share — Basic		$	(0.19	)		$	0.29
Net (loss) income per common share — Diluted:
(Loss) income from continuing operations		$	(0.19	)		$	0.27
Income from discontinued operations			—				0.02
Net (loss) income per common share — Diluted		$	(0.19	)		$	0.29
Weighted average common shares outstanding:
Basic			66,426				48,202
Diluted			66,426				48,202

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

COLONIAL PROPERTIES TRUST

		Three Months Ended
		March 31,
		2010				2009
Cash flows from operating activities:
Net (loss) income		$	(10,059	)		$	20,838
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			32,632				29,296
(Income) loss from unconsolidated entities			(270	)			650
Losses (gains) from sales of property			42				(8,537	)
Impairment and other losses			783				1,054
Gain on retirement of debt			(28	)			(25,319	)
Distributions of income from unconsolidated entities			1,872				3,800
Other, net			1,315				1,094
Change in:
Restricted cash			200				(1,652	)
Accounts receivable			(463	)			175
Prepaid expenses			(507	)			(7,190	)
Other assets			248				3,832
Change in:
Accounts payable			492				(13,540	)
Accrued interest			4,676				2,830
Accrued expenses and other			(10,318	)			10,367
Net cash provided by operating activities			20,615				17,698
Cash flows from investing activities:
Acquisition of properties			(225	)			—
Development expenditures			(6,127	)			(22,758	)
Tenant improvements and leasing commissions			(361	)			—
Capital expenditures			(6,088	)			(2,759	)
Proceeds from sales of property, net of selling costs			1,327				32,805
Issuance of notes receivable			—				(249	)
Repayments of notes receivable			4,842				55
Distributions from unconsolidated entities			—				—
Capital contributions to unconsolidated entities			(7	)			(41	)
Sale of securities			—				467
Net cash (used in) provided by investing activities			(6,639	)			7,520
Cash flows from financing activities:
Proceeds from additional borrowings			—				350,000
Proceeds from dividend reinvestment plan and exercise of stock options			386				109
Proceeds from common share issuance, net of expenses			32,461				—
Principal reductions of debt			(33,224	)			(71,777	)
Payment of debt issuance costs			—				(4,126	)
Proceeds from borrowings on revolving credit lines			240,000				210,000
Payments on revolving credit lines and overdrafts			(239,342	)			(490,788	)
Dividends paid to common and preferred shareholders			(13,862	)			(16,042	)
Distributions to noncontrolling partners in CRLP			(1,223	)			(2,215	)
Net cash used in financing activities			(14,804	)			(24,839	)
Decrease in cash and cash equivalents			(828	)			379
Cash and cash equivalents, beginning of period			4,590				9,185
Cash and cash equivalents, end of period		$	3,762			$	9,564
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, including amounts capitalized		$	16,593			$	19,844
Cash (received) paid during the period for income taxes		$	(133	)			—

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

COLONIAL PROPERTIES TRUST

(unaudited)

		Series D								Additional												Limited Partners’				Series B								Accumulated Other				Total				Redeemable
		Preferred				Common				Paid-In				Cumulative				Cumulative				Noncontrolling				Preferred				Treasury				Comprehensive				Shareholders’				Common
For the three months ended March 31, 2010 and 2009		Shares				Shares				Capital				Earnings				Distributions				Interest				Units				Shares				Loss				Equity				Units
Balance December 31, 2008		$	4			$	542			$	1,619,897			$	1,281,330			$	(1,700,739	)		$	1,943			$	100,000			$	(150,163	)		$	(5,205	)		$	1,147,609			$	124,848
Net income															17,766								541																18,307			$	2,531
Adjustment for amounts included in net income																																			1,206				1,206
Distributions on common shares ($0.25 per share)																			(12,156	)																			(12,156	)			(2,215	)
Distributions on preferred shares																			(2,073	)																			(2,073	)
Distributions on preferred units of CRLP																			(1,813	)																			(1,813	)
Issuance of Restricted Common Shares of Beneficial Interest											(315	)																											(315	)
Amortization of stock based compensation											513																												513
Cancellation of vested restricted shares to pay taxes											(37	)																											(37	)
Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan											109																												109
Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership											31																												31				(31	)
Change in interest of limited partners																							(995	)															(995	)
Change in redemption value of common units											7,168																												7,168				(7,168	)
Balance March 31, 2009		$	4			$	542			$	1,627,366			$	1,299,096			$	(1,716,781	)		$	1,489			$	100,000			$	(150,163	)		$	(3,999	)		$	1,157,554			$	117,965
Balance December 31, 2009		$	4			$	720			$	1,760,362			$	1,296,188			$	(1,753,015	)		$	985			$	100,000			$	(150,163	)		$	(2,957	)		$	1,252,124			$	133,537
Net income															(8,482	)							(77	)															(8,559	)		$	(1,500	)
Adjustment for amounts included in net income																																			114				114
Distributions on common shares ($0.15 per share)																			(10,015	)																			(10,015	)			(1,223	)
Distributions on preferred shares																			(2,034	)																			(2,034	)
Distributions on preferred units of CRLP																			(1,813	)																			(1,813	)
Issuance of Restricted Common Shares of Beneficial Interest							4				825																												829
Amortization of stock based compensation											165																												165
Issuance of common shares of beneficial interest through the Company’s dividend reinvestment plan and Employee Stock Purchase Plan											382																												382
Issuance of common shares of beneficial interest through conversion of units from Colonial Realty Limited Partnership											131																												131				(131	)
Equity Offering Programs, net of cost							25				32,436																												32,461
Change in interest of limited partners																							(64	)															(64	)
Change in redemption value of common units											(7,012	)																											(7,012	)			7,012
Balance March 31, 2010		$	4			$	749			$	1,787,289			$	1,287,706			$	(1,766,877	)		$	844			$	100,000			$	(150,163	)		$	(2,843	)		$	1,256,709			$	137,695

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

COLONIAL PROPERTIES TRUST

NOTES TO
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The consolidated condensed financial statements of Colonial Properties Trust (the “Trust”) have been prepared pursuant to the Securities and Exchange Commission (“SEC”) rules and regulations. The following notes, which represent interim disclosures as required by the SEC, highlight significant changes to the notes included in the December 31, 2009 audited consolidated financial statements of Colonial Properties Trust and should be read together with the consolidated financial statements and notes thereto included in the Colonial Properties Trust 2009 Annual Report on Form 10-K.

Note 1 — Organization and Business

As used herein, “the Company” means Colonial Properties Trust, an Alabama real estate investment trust (“REIT”) and one or more of its subsidiaries and other affiliates, including Colonial Realty Limited Partnership, a Delaware limited partnership (“CRLP”), Colonial Properties Services, Inc. (“CPSI”), Colonial Properties Services Limited Partnership (“CPSLP”) and CLNL Acquisition Sub, LLC (“CLNL”). The Company was originally formed as a Maryland REIT on July 9, 1993 and reorganized as an Alabama REIT under a new Alabama REIT statute on August 21, 1995. The Company is a multifamily-focused self-administered and self-managed equity REIT, which means that it is engaged in the acquisition, development, ownership, management and leasing of multifamily apartment communities and other commercial real estate properties. The Company’s activities include full or partial ownership and operation of a portfolio of 156 properties as of March 31, 2010, consisting of multifamily and commercial properties located in Alabama, Arizona, Florida, Georgia, Nevada, North Carolina, South Carolina, Tennessee, Texas and Virginia. As of March 31, 2010, including properties in lease-up, the Company owns interests in 111 multifamily apartment communities (including 105 consolidated properties, of which 104 are wholly-owned and one is partially-owned, and six properties partially-owned through unconsolidated joint venture entities), and 45 commercial properties, consisting of 30 office properties (including four wholly-owned consolidated properties and 26 properties partially-owned through unconsolidated joint venture entities) and 15 retail properties (including five wholly-owned consolidated properties and 10 properties partially-owned through unconsolidated joint venture entities).

Note 2 — Summary of Significant Accounting Policies

Unaudited Interim Consolidated Condensed Financial Statements

The accompanying unaudited interim consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information, including rules and regulations of the SEC. Accordingly, the interim financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2010, are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. Except for the impact from the adoption of new accounting pronouncements (see Note 2), the consolidated condensed balance sheet at December 31, 2009 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

Federal Income Tax Status

The Company, which is considered a corporation for federal income tax purposes, qualifies as a REIT and generally will not be subject to federal income tax to the extent it distributes its REIT taxable income to its shareholders. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate rates. The Company may also be subject to certain federal, state and local taxes on its income and property and to federal income and excise taxes on its undistributed income even if it does qualify as a REIT. For example, the Company will be subject to income tax to the extent it distributes less than 100% of its REIT taxable income (including capital gains) and the Company has certain gains that, if recognized, will be subject to corporate tax because it acquired the assets in tax-free acquisitions of non-REIT corporations.

The Company’s consolidated financial statements include the operations of a taxable REIT subsidiary, CPSI, which is not entitled to a dividends paid deduction and is subject to federal, state and local income taxes. CPSI uses the liability method of accounting for income taxes. Deferred income tax assets and liabilities result from temporary differences. Temporary differences are differences between tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future periods. CPSI provides property development, construction services, leasing and management services for joint-venture and third-party owned properties and administrative services to the Company and engages in for-sale development and condominium conversion activity. The Company generally reimburses CPSI for payroll and other costs incurred in providing services to the Company. All inter-company transactions are eliminated in the accompanying consolidated condensed financial statements. CPSI has an income tax receivable of $17.7 million and $17.8 million as of March 31, 2010 and December 31, 2009, respectively, which is included in “Accounts receivable, net” on the Company’s Consolidated Condensed Balance Sheet. CPSI’s consolidated provision for income taxes was zero for each of the three months ended March 31, 2010 and 2009. CPSI’s effective income tax rate was 0% for each of the three months ended March 31, 2010 and 2009.

Tax years 2003 through 2009 are subject to examination by the federal taxing authorities. Generally, tax years 2006 through 2008 are subject to examination by state taxing authorities. There is one state tax examination currently in process.

On November 6, 2009, the Worker, Homeownership and Business Assistance Act of 2009 was signed into law, which expands the net operating loss (“NOL”) carryback rules to allow businesses to carryback NOLs incurred in either 2008 or 2009 up to five years. As a result of the new legislation, CPSI is able to carryback tax losses that occurred in the year ending December 31, 2009 against income that was recognized in 2005 and 2006. During the fourth quarter 2009, CPSI recorded an income tax benefit as a result of the new NOL carryback rules. Refunds are anticipated to be collected in 2010.

On February 17, 2009, the American Recovery and Reinvestment Act of 2009 (the “Act”) was signed into law. Section 1231 of the Act allows some business taxpayers to elect to defer cancellation of indebtedness income when the taxpayer repurchases applicable debt instruments after December 31, 2008 and before January 1, 2011. Under the Act, the cancellation of indebtedness income in 2009 could be deferred for five years (until 2014), and the cancellation of indebtedness income in 2010 could be deferred for four years (until 2014), subject in both cases to acceleration events. After the deferral period, 20% of the cancellation of indebtedness income would be included in taxpayer’s gross income in each of the next five taxable years. The deferral is an irrevocable election made on the taxpayer’s income tax return for the taxable year of the reacquisition. The Company anticipates making this election with regard to a portion of the CRLP debt repurchased in 2009.

The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to the Company’s financial results. When the Company has received an assessment for interest and/or penalties, it has been classified in the financial statements as income tax expense.

Notes Receivable

Notes receivable consists primarily of promissory notes representing loans by the Company to third parties. The Company records notes receivable at cost. The Company evaluates the collectability of both interest and principal for each of its notes to determine whether they are impaired. A note is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a note is considered to be impaired, the amount of the allowance is calculated by comparing the recorded investment to either the value determined by discounting the expected future cash flows at the note’s effective interest rate or to the value of the collateral if the note is collateral dependent.

As of March 31, 2010, the Company had notes receivable of $19.2 million, consisting primarily of a $16.9 million seller-financing note with a five year term at an interest rate of 5.6% associated with the disposition of Colonial Promenade at Fultondale in February 2009. In November 2009, the Company disposed of a tract of land for $7.3 million, which included a $5.0 million seller-financing note for a term of six months at an interest rate of 7.5%. The balance on this note was paid in full in March 2010.

The Company had accrued interest related to its outstanding notes receivable of $0.1 million as of March 31, 2010 and 2009. As of March 31, 2010 and December 31, 2009, the Company had recorded a reserve of $1.9 million against its outstanding notes receivable and accrued interest. The weighted average interest rate on the notes receivable outstanding at March 31, 2010 and December 31, 2009 was approximately 5.6% and 6.0%, respectively. Interest income is recognized on an accrual basis.

Fair Value Measures

The Company applies ASC 820-10 “Fair Value Measurements and Disclosures”, in relation to the valuation of real estate assets recorded at fair value, to its impairment valuation analysis of real estate assets (see Note 4) and to its disclosure of the fair value of financial instruments, principally indebtedness (see Note 12) and notes receivable (see above). The disclosure of estimated fair values was determined by management using available market information, considering market participant assumptions and appropriate valuation methodologies available to management at March 31, 2010. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, there can be no assurance that the estimates presented below, using Level 2 and 3 inputs, are indicative of the amounts the Company could realize on disposition of the real estate assets or financial instruments. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts.

The following table presents the Company’s real estate assets reported at fair market value and the related level in the fair value hierarchy as defined by ASC 820 used to measure those assets, liabilities and disclosures:

(in thousands)		Fair value measurements as of March 31, 2010
Assets (Liabilities)		Total				Level 1				Level 2				Level 3
Real estate assets, including land held for sale		$	31,451			$	—			$	—			$	31,451

Real estate assets, including land held for sale were valued using sales activity for similar assets, current contracts and other inputs management believes are consistent with those that market participants would use.

At March 31, 2010, the estimated fair value of fixed rate debt was approximately $1.31 billion (carrying value of $1.35 billion) and the estimated fair value of the Company’s variable rate debt, including the Company’s unsecured credit facility, is consistent with the carrying value of $325.9 million.

The estimated fair value of the Company’s notes receivable at March 31, 2010 and December 31, 2009 was approximately $17.4 million and $22.2 million, respectively, based on market rates and similar financing arrangements.

Accounting Pronouncements

Pronouncements Recently Adopted

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. FIN 46(R), now known as ASC 810-10-30, Initial Measurement. ASC 810-10-30 amends the manner in which entities evaluate whether consolidation is required for variable interest entities (VIEs). A company must first perform a qualitative analysis in determining whether it must consolidate a VIE, and if the qualitative analysis is not determinative, must perform a quantitative analysis. Further, ASC 810-10-30 requires that companies continually evaluate VIEs for consolidation, rather than assessing based upon the occurrence of triggering events. ASC 810-10-30 also requires enhanced disclosures about how a company’s involvement with a VIE affects its financial statements and exposure to risks. ASC 810-10-30 is effective for fiscal years and interim periods beginning after November 15, 2009. The adoption of ASC 810-10-30 did not have a material impact on the Company’s consolidated condensed financial statements.

In January 2010, the FASB issued ASU 2010-06, an update to Topic 820, Fair Value Measurements and Disclosures. ASU 2010-06 provides an update specifically to Subtopic 820-10 that requires new disclosures including, details of significant transfers in and out of Level 1 and Level 2 measurements and the reasons for the transfers and a gross presentation of activity within the Level 3 roll forward, presenting separately information about purchases, sales, issuances, and settlements. ASU 2010-06 is effective for the first interim or annual reporting period beginning after December 15, 2009, except for the gross presentation of the Level 3 roll forward, which is required for interim and annual reporting periods beginning after December 15, 2010. The adoption of ASU 2010-06 did not have a material impact on the Company’s consolidated condensed financial statements.

Note 3 — Restructuring Charges

As a result of the Company’s 2009 initiative to improve efficiencies with respect to management of its existing properties and operation of the Company’s portfolio, including reducing overhead and postponing or phasing future development activities, during the three months ended March 31, 2009, the Company reduced its workforce by eliminating certain positions resulting in the incurrence of an aggregate of $0.8 million in termination benefits and severance related charges. Of the $0.8 million in restructuring charges, approximately $0.4 million was associated with the Company’s multifamily segment, including $0.2 million associated with development personnel, $0.3 million was associated with the Company’s commercial segment, including $0.2 million associated with development personnel, and $0.1 million were non-divisional charges.

The expenses of the Company’s reduction in workforce and other termination costs, as described above, are included in “Restructuring charges” in the Consolidated Condensed Statements of Operations for the three months ended March 31, 2009.

Note 4 — Impairment

During the three months ended March 31, 2010, the Company recorded $0.8 million as a result of casualty losses at three multifamily apartment communities. The losses at two of these communities were a result of fire damage and the loss at the other community was a result of carport structural damage caused by inclement weather.

In February 2009, the Company reached an agreement in principle to transfer its remaining noncontrolling joint venture interest in Colonial Pinnacle Craft Farms I, a 220,000-square-foot (excluding anchor-owned square-footage) retail shopping center located in Gulf Shores, Alabama, to the majority joint venture partner. As a result of this agreement and the resulting asset valuation, the Company recorded an impairment charge of approximately $0.7 million during the three months ended March 31, 2009, which represented the Company’s remaining equity interest in the joint venture.

In March 2009, the Company completed the sale of the remaining 17 unsold units at the Regents Park for-sale residential project located in Atlanta, Georgia for $16.3 million in cash. Since the carrying value exceeded the sales price of the units, the Company recorded an impairment charge of $0.3 million.

These charges, as described above, are included in “Impairment and other losses” in the Consolidated Condensed Statements of Operations for the three months ended March 31, 2010 and 2009.

The Company’s determination of fair value is based on inputs management believes are consistent with those that market participants would use. The Company estimates the fair value of each property and development project evaluated for impairment based on current market conditions and assumptions made by management, which may differ materially from actual results if market conditions continue to deteriorate or improve. Specific facts and circumstances of each project are evaluated, including local market conditions, traffic, sales velocity, relative pricing and cost structure. The Company will continue to monitor the specific facts and circumstances at the Company’s for-sale properties and development projects. Existing economic and market uncertainties may impact the number of projects the Company can sell, the timing of the sales and/or the prices at which the Company can sell them in future periods, and may result in additional impairment charges in connection with sales. If the Company is unable to sell projects, the Company may incur additional impairment charges on projects previously impaired as well as on projects not currently impaired but for which indicators of impairment may exist, which would decrease the value of the Company’s assets as reflected on the balance sheet and adversely affect net income and equity. There can be no assurances of the amount or pace of future property sales and closings, particularly given current economic and market conditions.

Note 5 — Disposition Activity

Net income and gain on disposition of real estate for properties sold in which the Company does not maintain continuing involvement are reflected in the Consolidated Condensed Statements of Operations as “Discontinued Operations” for all periods presented. All of the operating properties sold during 2009 in which the Company did not maintain a continuing interest were classified as discontinued operations. The following are the properties the Company disposed of in 2009 that are classified as discontinued operations:

						Units/ Square
Property		Location		Date Sold		Feet
Multifamily
Portofino at Jensen Beach		Port St. Lucie, FL		September 2009			118
Murano at Delray Beach		West Palm Beach, FL		September 2009			93
Commercial
Colonial Promenade Winter Haven		Orlando, FL		December 2009			286,297

Additionally, the Company classifies real estate assets as held for sale only after the Company has received approval by its internal investment committee, the Company has commenced an active program to sell the assets, the Company does not intend to retain a continuing interest in the property, and in the opinion of the Company’s management, it is probable the assets will sell within the next 12 months. As of March 31, 2010, the Company had classified four for-sale developments as held for sale. These real estate assets are reflected in the accompanying Consolidated Condensed Balance Sheet at $33.9 million as of March 31, 2010, which represents the lower of depreciated cost or fair value less costs to sell. There is no mortgage debt associated with these properties as of March 31, 2010.

During the three months ended March 31, 2010, the Company transferred one commercial development and two for-sale developments from assets “held for sale” to “assets held for investment” as the Company has decided it will hold this land for a longer term. In addition, the Company reallocated the commercial portion of two mixed-use development sites from assets “held for sale” to “assets held for investment”.

As of March 31, 2010, there were no operating properties classified as held for sale. The operating results of properties (excluding condominium conversion properties not previously operated) designated as held for sale or sold, are included in discontinued operations in the Consolidated Condensed Statements of Operations for all periods presented. The reserves, if any, to write down the carrying value of the real estate assets designated and classified as held for sale are also included in discontinued operations (excluding condominium conversion properties not previously operated). Additionally, any impairment losses on assets held for continuing use are included in continuing operations.

Below is a summary of the operations of the properties classified as discontinued operations during the three months ended March 31, 2010 and 2009:

		Three Months Ended
		March 31,
(amounts in thousands)		2010				2009
Property revenues:
Base rent		$	(13	)		$	1,156
Tenant recoveries			(15	)			65
Other revenue			—				104
Total revenues			(28	)			1,325
Property operating and administrative expenses			4				645
Depreciation and amortization			—				139
Total expenses			4				784
(Loss) income from discontinued operations before net gain on disposition of discontinued operations			(32	)			541
Net (loss) gain on disposition of discontinued operations, net of income taxes			(35	)			45
Noncontrolling interest in CRLP from discontinued operations			8				(163	)
Noncontrolling interest to limited partners			(5	)			468
(Loss) income from discontinued operations attributable to parent company		$	(64	)		$	891

Note 6 — For-Sale Activities

During the three months ended March 31, 2010 and 2009, the Company, through CPSI, sold four and 33 units, respectively, at its for-sale residential development properties, including six condominium conversion units in 2009.

The following is a summary of revenues and costs of condominium conversion and for-sale residential activities (including activities in continuing and discontinued operations) for the three months ended March 31, 2010 and 2009:

		Three Months Ended
		March 31,
(amounts in thousands)		2010				2009
Condominium conversion revenues, net		$	—			$	327
Condominium conversion costs			—				(259	)
Gains on condominium conversion sales, before income taxes			—				68
For-sale residential revenues, net			1,508				19,234
For-sale residential costs			(1,531	)			(19,255	)
Losses on for-sale residential sales, before income taxes			(23	)			(21	)
Provision for income taxes			—				(26	)
(Loss) gain on condominium conversions and for-sale residential sales, net of income taxes		$	(23	)		$	21

The net gains on condominium conversion sales are classified in discontinued operations if the related condominium property was previously operated by the Company as an apartment community. For the three months ended March 31, 2009, net gains on condominium conversion sales of approximately $42,000 are included in discontinued operations. As of December 31, 2009, the Company had sold all remaining condominium conversion properties.

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

Note 7 — Undeveloped Land and Construction in Progress

The Company currently has two active development projects, as outlined in the table below. In 2009, the Company decided to postpone development activities associated with the projects listed under “Future Developments” in the table below until it determines that the current economic environment has sufficiently improved.

								Costs
				Total Units/				Capitalized
				Square Feet (1)				to Date
		Location		(unaudited)				(in thousands)
Active Developments:
Commercial Projects:
Colonial Promenade Craft Farms		Gulf Shores, AL			68			$	8,003
Colonial Promenade Nord du Lac (Phase I) (2)		Covington, LA			174				7,282
					242			$	15,285
Future Developments:
Multifamily Projects:
Colonial Grand at Sweetwater		Phoenix, AZ			195				7,246
Colonial Grand at Thunderbird		Phoenix, AZ			244				8,312
Colonial Grand at Randal Park (3)		Orlando, FL			750				19,200
Colonial Grand at Hampton Preserve		Tampa, FL			486				14,998
Colonial Grand at South End		Charlotte, NC			353				12,044
Colonial Grand at Azure		Las Vegas, NV			188				7,804
Colonial Grand at Cityway		Austin, TX			320				4,951
					2,536			$	74,555
Commercial Projects:
Colonial Promenade Huntsville		Huntsville, AL			111				9,713
Colonial Promenade Nord du Lac (2)		Covington, LA			—				33,049
					111			$	42,762
Other Projects and Undeveloped Land
Multifamily									3,593
Commercial									69,472
For-Sale Residential Land (4)									70,342
								$	143,407
Consolidated Construction in Progress								$	276,009

Interest capitalized on construction in progress during the three months ended March 31, 2010 and 2009 was $0.4 million and $2.2 million, respectively.

Note 8 — Net (Loss) Income Per Share

For the three months ended March 31, 2010 and 2009, a reconciliation of the numerator and denominator used in the basic and diluted income from continuing operations per common share is as follows:

		Three Months Ended
		March 31,				March 31,
(amounts in thousands)		2010				2009
Numerator:
Net (loss) income attributable to parent company		$	(10,295	)		$	15,953
Less:
Preferred stock dividends			(2,034	)			(2,073	)
Income from discontinued operations			64				(891	)
Income allocated to participating securities			(98	)			(106	)
Preferred share issuance costs write-off, net of discount			—				(5	)
(Loss) income from continuing operations available to common shareholders		$	(12,363	)		$	12,878
Denominator:
Denominator for basic net income per share - weighted average common shares			66,426				48,202
Effect of dilutive securities			—				—
Denominator for diluted net income per share - adjusted weighted average common shares			66,426				48,202

For the three months ended March 31, 2010, the Company reported a net loss from continuing operations, and as such, 17,481 dilutive share equivalents have been excluded from the computation of diluted net income per share because including such shares would be anti-dilutive. For the three months ended March 31, 2009, 1,373,754 outstanding share options were excluded from the computation of diluted net income per share because the grant date prices were greater than the average market price of the common shares and, therefore, the effect would be anti-dilutive.

Note 9 — Equity

The following table presents the changes in the issued common shares of beneficial interest since December 31, 2009 (but excluding 8,151,740 and 8,162,845 units of CRLP at March 31, 2010 and December 31, 2009, respectively, which are redeemable for either cash equal to the fair market value of a common share at the time of redemption or, at the option of the Company, one common share):

Issued at December 31, 2009 (1)			71,989,227
Common shares issued through dividend reinvestments			22,048
Restricted shares issued (cancelled), net			397,281
Shares issued under “at-the-market” equity offering program			2,499,518
Redemption of CRLP units for common shares			11,105
Issuances under other employee and nonemployee share plans			13,692
Issued at March 31, 2010 (1)			74,932,871

At-the-Market Equity Offering Program

On February 22, 2010, the Trust’s Board of Trustees approved the issuance of up to $50.0 million of the Company’s common shares under an “at-the-market” equity offering program. On March 4, 2010, the Company and CRLP entered into separate Equity Distribution Agreements with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC (each an “Agent,” and together the “Agents”), respectively, pursuant to which the Company may sell from time to time, in an “at-the-market” equity offering program under its Registration Statement on Form S-3 (File No. 333-158081), up to $50.0 million in aggregate offering price of its common shares. During the three months ended March 31, 2010, the Company issued 2,499,518 common shares at a weighted average issue price of $13.25 per share generating net proceeds of approximately $32.4 million. The Company used these proceeds to repay a portion of the outstanding balance under its unsecured credit facility and for general corporate purposes.

Repurchases of Series D Preferred Depositary Shares

In October 2008, the Company’s Board of Trustees authorized a repurchase program which allowed the Company to repurchase up to an additional $25.0 million of its outstanding 8 1/8% Series D preferred depositary shares over a 12 month period. The Board of Trustees of the Company, as general partner of CRLP, also authorized the repurchase of a corresponding amount of Series D Preferred Units of CRLP. During 2009, the Company repurchased 6,515 shares of its outstanding 8 1/8% Series D preferred depositary shares (and CRLP repurchased a corresponding amount of Series D Preferred Units) in open market transactions for a purchase price of $126,761, or $19.46 per depositary share. The Company received a 22.2% discount on the repurchase to the liquidation preference price of $25.00 per depositary share and wrote off a nominal amount of issuance costs. In the aggregate, the Company repurchased $24.1 million of its outstanding 8 1/8% Series D preferred depositary shares (and CRLP has repurchased a corresponding amount of Series D Preferred Units) under this program, which expired in late October 2009.

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

Note 10 — Segment Information

The Company currently manages its business based on the performance of two operating segments: multifamily and commercial. The multifamily and commercial segments have separate management teams that are responsible for acquiring, developing, managing and leasing properties within each respective segment. The multifamily management team is responsible for all aspects of for-sale developments, including disposition activities. The multifamily segment includes the operations and assets of the for-sale developments due to the insignificance of these operations in the periods presented. Commercial management is responsible for all aspects of the Company’s commercial property operations, including the management and leasing services for 45 commercial properties, as well as third-party management services for commercial properties in which the Company does not have an ownership interest and for brokerage services in other commercial property transactions.

The pro-rata portion of the revenues, net operating income (“NOI”), and assets of the partially-owned unconsolidated entities in which the Company has an interest are included in the applicable segment information. Additionally, the revenues and NOI of properties sold that are classified as discontinued operations are also included in the applicable segment information. In reconciling the segment information presented below to total revenues, income from continuing operations, and total assets, investments in partially-owned unconsolidated entities are eliminated as equity investments and their related activity are reflected in the consolidated financial statements as investments accounted for under the equity method, and discontinued operations are reported separately. Management evaluates the performance of its multifamily and commercial segments and allocates resources to them based on segment NOI. Segment NOI is defined as total property revenues less total property operating expenses (such items as repairs and maintenance, payroll, utilities, property taxes, insurance and advertising), and includes revenues/expenses from unconsolidated partnerships and joint ventures. Management evaluates the performance of its for-sale residential business based on net gains / losses. Presented below is segment information, for the multifamily and commercial segments, including the reconciliation of total segment revenues to total revenues and total segment NOI to income from continuing operations before noncontrolling interest for the three months ended March 31, 2010 and 2009, and total segment assets to total assets as of March 31, 2010 and December 31, 2009.

		Three Months Ended
		March 31,
(in thousands)		2010				2009
Revenues:
Segment Revenues:
Multifamily		$	75,877			$	77,141
Commercial			20,991				23,474
Total Segment Revenues			96,868				100,615
Partially-owned unconsolidated entities - Multifamily			(943	)			(2,001	)
Partially-owned unconsolidated entities - Commercial			(8,138	)			(16,484	)
Construction revenues			—				35
Other non-property related revenue			2,898				3,455
Discontinued operations property revenues			28				(1,325	)
Total Consolidated Revenues			90,713				84,295
NOI:
Segment NOI:
Multifamily			42,678				44,584
Commercial			14,649				15,059
Total Segment NOI			57,327				59,643
Partially-owned unconsolidated entities - Multifamily			(459	)			(1,033	)
Partially-owned unconsolidated entities - Commercial			(5,563	)			(10,569	)
Unallocated corporate revenues			2,898				3,455
Discontinued operations property NOI			32				(681	)
Construction NOI			—				1
Property management expenses			(1,807	)			(1,918	)
General and administrative expenses			(4,807	)			(4,382	)
Management fee and other expenses			(2,673	)			(4,217	)
Restructuring charges			—				(812	)
Investment and development (1)			(3	)			(165	)
Depreciation			(30,279	)			(27,785	)
Amortization			(2,224	)			(873	)
Impairment and other losses (2)			(783	)			(1,054	)
Income from operations			11,659				9,610
Total other income (expense), net (3)			(21,651	)			10,642
(Loss) income from continuing operations		$	(9,992	)		$	20,252

		March 31,				December 31,
(in thousands)		2010				2009
Assets
Segment Assets
Multifamily		$	2,482,764			$	2,502,772
Commercial			534,118				538,046
Total Segment Assets			3,016,882				3,040,818
Unallocated corporate assets (4)			125,686				131,814
		$	3,142,568			$	3,172,632

Note 11 — Investment in Partially-Owned Entities

Investments in Consolidated Partially-Owned Entities

The Company has one partially-owned investment, the CMS/Colonial Canyon Creek joint venture, which is consolidated in its financial statements. As a result of a preferred equity contribution of $11.5 million made by the Company to the joint venture in September 2009 in connection with a construction loan refinancing, the Company began consolidating the CMS/Colonial Canyon Creek joint venture in its financial statements beginning with the third quarter of 2009.

Investments in Unconsolidated Partially-Owned Entities

The Company accounts for the following investments in unconsolidated partially-owned entities using the equity method. The following table summarizes the investments in partially-owned entities as of March 31, 2010 and December 31, 2009:

						(in thousands)
		Percent				March 31,				December 31,
		Owned				2010				2009
Multifamily:
Belterra, Ft. Worth, TX			10.00	%		$	500			$	525
Regents Park (Phase II), Atlanta, GA			40.00	%(1)			3,382				3,387
CG at Huntcliff, Atlanta, GA			20.00	%			1,603				1,646
CG at McKinney, Dallas, TX			25.00	%(1)			1,721				1,721
CG at Research Park, Raleigh, NC			20.00	%			891				914
DRA CV at Cary, Raleigh, NC			20.00	%			1,398				1,440
DRA The Grove at Riverchase, Birmingham, AL			20.00	%			1,102				1,133
Total Multifamily						$	10,597			$	10,766
Commercial:
600 Building Partnership, Birmingham, AL			33.33	%			169				154
Colonial Promenade Alabaster II/Tutwiler II, Birmingham, AL			5.00	%(2)			(54	)			(190	)
Colonial Promenade Madison, Huntsville, AL			25.00	%			2,108				2,119
Colonial Promenade Smyrna, Smyrna, TN			50.00	%			2,188				2,174
DRA / CLP JV			15.00	%(3)			(16,161	)			(15,321	)
Highway 150, LLC, Birmingham, AL			10.00	%			53				59
Bluerock, Huntsville , AL			10.00	%(4)			(4,846	)			(4,617	)
Parkside Drive LLC I, Knoxville, TN			50.00	%			2,777				3,073
Parkside Drive LLC II, Knoxville, TN			50.00	%			7,227				7,210
Parkway Place Limited Partnership, Huntsville, AL			50.00	%			9,852				10,168
Total Commercial						$	3,313			$	4,829
Other:
Colonial / Polar-BEK Management Company, Birmingham, AL			50.00	%			17				35
Heathrow, Orlando, FL			50.00	%(1)			1,766				1,792
						$	1,783			$	1,827
						$	15,693			$	17,422