Edgar Filing: GLIMCHER REALTY TRUST

glimcher_10q-093008.htm

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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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For The Transition Period From _____ To ______

Commission file number 001-12482

GLIMCHER REALTY TRUST

(Exact Name of Registrant as Specified in Its Charter)

Maryland	31-1390518
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

180 East Broad Street	43215
Columbus, Ohio	(Zip Code)
(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (614) 621-9000

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 [_]

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X]	Accelerated filer [_]
Non-accelerated filer [_] (Do not check if a smaller reporting company)	Smaller reporting company [_]

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

Yes [_] No [X]

As of October 23, 2008, there were 37,805,466 Common Shares of Beneficial Interest outstanding, par value $0.01 per share.

1 of 43 pages

GLIMCHER REALTY TRUST

FORM 10-Q

INDEX


PART I: FINANCIAL INFORMATION	PAGE

Item 1. Financial Statements.

Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007.	3

Consolidated Statements of Operations and Comprehensive Income for the three months ended September 30, 2008 and 2007.	4

Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2008 and 2007.	5

Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007.	6

Notes to Consolidated Financial Statements.	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	40

Item 4. Controls and Procedures.	41


PART II: OTHER INFORMATION

Item 1. Legal Proceedings.	42

Item 1A. Risk Factors.	42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	42

Item 3. Defaults Upon Senior Securities.	42

Item 4. Submission of Matters to a Vote of Security Holders.	42

Item 5. Other Information.	42

Item 6. Exhibits.	42


SIGNATURES	43

Table of Contents

PART 1

FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

GLIMCHER REALTY TRUST

CONSOLIDATED BALANCE SHEETS

(unaudited)

(dollars in thousands, except per share, par value and unit amounts)

ASSETS

	September 30, 2008		December 31, 2007
Investment in real estate:
Land	$	243,569	$	240,156
Buildings, improvements and equipment		1,751,018		1,703,491
Developments in progress		105,916		96,054
		2,100,503		2,039,701
Less accumulated depreciation		552,331		500,710
Property and equipment, net		1,548,172		1,538,991
Deferred costs, net		19,098		19,225
Real estate assets held-for-sale		63,138		68,671
Investment in and advances to unconsolidated real estate entities		117,665		83,116
Investment in real estate, net		1,748,073		1,710,003

Cash and cash equivalents		12,636		22,147
Non-real estate assets associated with discontinued operations		3,316		5,002
Restricted cash		14,851		14,217
Tenant accounts receivable, net		34,018		39,475
Deferred expenses, net		7,162		5,915
Prepaid and other assets		35,983		34,188
Total assets	$	1,856,039	$	1,830,947

LIABILITIES AND SHAREHOLDERS’ EQUITY

Mortgage notes payable	$	1,200,512		$	1,170,669
Mortgage notes payable associated with discontinued operations		72,229			81,541
Notes payable		354,036			300,000
Other liabilities associated with discontinued operations		1,924			2,763
Accounts payable and accrued expenses		60,801			62,969
Distributions payable		17,410			23,915
Total liabilities		1,706,912			1,641,857

Minority interest in operating partnership		-			-

Shareholders’ equity:
Series F Cumulative Preferred Shares of Beneficial Interest, $0.01 par value, 2,400,000 shares issued and outstanding		60,000			60,000
Series G Cumulative Preferred Shares of Beneficial Interest, $0.01 par value, 6,000,000 shares issued and outstanding		150,000			150,000
Common Shares of Beneficial Interest, $0.01 par value, 37,796,682 and 37,687,039 shares issued and outstanding as of September 30, 2008 and December 31, 2007, respectively		378			377
Additional paid-in capital		563,912			563,460
Distributions in excess of accumulated earnings		(625,817	)		(584,343	)
Accumulated other comprehensive income (loss)		654			(404	)
Total shareholders’ equity		149,127			189,090
Total liabilities and shareholders’ equity	$	1,856,039		$	1,830,947

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

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GLIMCHER REALTY TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)

(dollars and shares in thousands, except per share and unit amounts)

	For the Three Months Ended September 30,
	2008			2007
Revenues:
Minimum rents	$	47,419		$	45,960
Percentage rents		1,455			1,339
Tenant reimbursements		22,845			21,618
Other		9,700			4,538
Total revenues		81,419			73,455

Expenses:
Property operating expenses		16,691			15,471
Real estate taxes		8,489			7,610
Provision for doubtful accounts		1,309			946
Other operating expenses		6,671			1,314
Depreciation and amortization		21,215			17,486
General and administrative		4,473			3,802
Total expenses		58,848			46,629

Operating income		22,571			26,826

Interest income		262			220
Interest expense		20,723			21,612
Minority interest in operating partnership		-			3,665
Equity in (loss) income of unconsolidated real estate entities, net		(299	)		164
Income from continuing operations		1,811			1,933
Discontinued operations:
Gain on sale of properties, net		-			48,784
Impairment adjustment		-			102
Loss from operations		(895	)		(67	)
Net income		916			50,752
Less: Preferred stock distributions		4,360			4,360
Net (loss) income available to common shareholders	$	(3,444	)	$	46,392

(Loss) Earnings Per Common Share (“EPS”):
EPS (basic):
Continuing operations	$	(0.07	)	$	0.03
Discontinued operations	$	(0.02	)	$	1.20
Net (loss) income	$	(0.09	)	$	1.24

EPS (diluted):
Continuing operations	$	(0.07	)	$	0.03
Discontinued operations	$	(0.02	)	$	1.20
Net (loss) income	$	(0.09	)	$	1.23

Weighted average common shares outstanding		37,608			37,551
Weighted average common shares and common share equivalent outstanding		37,608			40,741

Cash distributions declared per common share of beneficial interest	$	0.3200		$	0.4808

Net income	$	916		$	50,752
Other comprehensive income (loss) on derivative instruments, net		36			(355	)
Comprehensive income	$	952		$	50,397

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

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GLIMCHER REALTY TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(unaudited)

(dollars and shares in thousands, except per share and unit amounts)

	For the Nine Months Ended September 30,
	2008			2007
Revenues:
Minimum rents	$	144,385		$	136,778
Percentage rents		3,728			3,749
Tenant reimbursements		68,689			63,828
Other		20,378			13,229
Total revenues		237,180			217,584

Expenses:
Property operating expenses		49,590			46,478
Real estate taxes		25,918			23,738
Provision for doubtful accounts		4,318			2,569
Other operating expenses		10,980			5,544
Depreciation and amortization		60,667			53,543
General and administrative		13,048			12,385
Total expenses		164,521			144,257

Operating income		72,659			73,327

Interest income		791			459
Interest expense		61,977			66,863
Minority interest in operating partnership		-			3,317
Equity in (loss) income of unconsolidated real estate entities, net		(144	)		1,557
Income from continuing operations		11,329			5,163
Discontinued operations:
Gain on sale of properties, net		1,252			47,349
Impairment loss		-			(2,350	)
(Loss) income from operations		(1,894	)		5,139
Net income		10,687			55,301
Less: Preferred stock distributions		13,078			13,078
Net (loss) income available to common shareholders	$	(2,391	)	$	42,223

(Loss) Earnings Per Common Share (“EPS”):
EPS (basic):
Continuing operations	$	(0.05	)	$	( 0.11	)
Discontinued operations	$	(0.02	)	$	1.25
Net (loss) income to common shareholders	$	(0.06	)	$	1.14

EPS (diluted):
Continuing operations	$	(0.05	)	$	( 0.11	)
Discontinued operations	$	(0.02	)	$	1.25
Net (loss) income to common shareholders	$	(0.06	)	$	1.14

Weighted average common shares outstanding		37,595			37,120
Weighted average common shares and common share equivalent outstanding		37,595			40,116

Cash distributions declared per common share of beneficial interest	$	0.9600		$	1.4424

Net income	$	10,687		$	55,301
Other comprehensive income (loss) on derivative instruments, net		1,058			(239	)
Comprehensive income	$	11,745		$	55,062

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

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GLIMCHER REALTY TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(dollars in thousands)

	For the Nine Months Ended September 30,
	2008			2007
Cash flows from operating activities:
Net income	$	10,687		$	55,301
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		6,036			4,506
Depreciation and amortization		60,667			55,928
Loan fee amortization		1,461			1,553
Equity in loss (income) of unconsolidated real estate entities, net		144			(1,557	)
Capitalized development costs charged to expense		326			1,069
Minority interest in operating partnership		-			3,317
Impairment losses		-			2,350
Gain on sales of properties – discontinued operations		(1,252	)		(47,349	)
Gain on sales of outparcels		(883	)		(1,093	)
Stock option related expense		230			1,401
Net changes in operating assets and liabilities:
Tenant accounts receivable, net		178			2,547
Prepaid and other assets		(1,536	)		322
Accounts payables and accrued expenses		(5,702	)		(8,802	)

Net cash provided by operating activities		70,356			69,493

Cash flows from investing activities:
Additions to investment in real estate		(72,099	)		(74,277	)
Deposits on investment in real estate		-			(3,000	)
Investment in unconsolidated real estate entities		(69,952	)		(11,103	)
Cash distributions from unconsolidated real estate entities		35,259			-
Proceeds from sale of outparcels		6,060			1,235
Proceeds from sale of assets		-			90
Proceeds from sale of properties		9,450			185,129
(Contributions to) withdrawals from restricted cash		(260	)		424
Additions to deferred expenses		(4,069	)		(3,205	)

Net cash (used in) provided by investing activities		(95,611	)		95,293

Cash flows from financing activities:
Proceeds from (payments to) revolving line of credit, net		54,036			(45,600	)
Additions to deferred financing costs		(453	)		-
Proceeds from issuance of mortgage notes payable		42,250			-
Principal payments on mortgage notes payable		(21,594	)		(71,197	)
Exercise of stock options and other		235			15,647
Cash distributions		(58,730	)		(70,765	)

Net cash provided by (used in) financing activities		15,744			(171,915	)

Net change in cash and cash equivalents		(9,511	)		(7,129	)

Cash and cash equivalents, at beginning of period		22,147			11,751

Cash and cash equivalents, at end of period	$	12,636		$	4,622

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

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GLIMCHER REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

1.	Organization and Basis of Presentation

Organization

Glimcher Realty Trust (“GRT”) is a fully-integrated, self-administered and self-managed, Maryland real estate investment trust (“REIT”), which owns, leases, manages and develops a portfolio of retail properties (the “Property” or “Properties”) consisting of enclosed regional and super regional malls (“Malls”) and community shopping centers (“Community Centers”). At September 30, 2008, GRT both owned interests in and managed 26 Properties, consisting of 23 Malls (21 wholly owned and 2 partially owned through a joint venture) and 3 Community Centers. The “Company” refers to Glimcher Realty Trust and Glimcher Properties Limited Partnership, a Delaware limited partnership, as well as entities in which the Company has an interest, collectively.

Basis of Presentation

The consolidated financial statements include the accounts of Glimcher Realty Trust, Glimcher Properties Limited Partnership (the “Operating Partnership,” “OP” or “GPLP”) and Glimcher Development Corporation (“GDC”). As of September 30, 2008, GRT was a limited partner in GPLP with a 92.2% ownership interest and GRT’s wholly owned subsidiary, Glimcher Properties Corporation (“GPC”), was GPLP’s sole general partner, with a 0.5% interest in GPLP. GDC, a wholly-owned subsidiary of GPLP, provides development, construction, leasing and legal services to the Company’s affiliates and is a taxable REIT subsidiary. The equity method of accounting is applied to entities in which the Company does not have a controlling direct or indirect voting interest, but can exercise influence over the entity with respect to its operations and major decisions. These entities are reflected on the Company’s consolidated financial statements as “Investment in and advances to unconsolidated real estate entities.” All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The information furnished in the accompanying consolidated balance sheet, statements of operations and comprehensive income, and statements of cash flows reflect all adjustments which are, in the opinion of management, recurring and necessary for a fair statement of the aforementioned financial statements for the interim period. Operating results for the three and nine months ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

The December 31, 2007 balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S.”). The consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s Form 10-K for the year ended December 31, 2007.

2.	Summary of Significant Accounting Policies

Revenue Recognition

Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis. Percentage rents, which are based on tenants’ sales as reported to the Company, are recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants’ leases. The percentage rents are recognized based upon the measurement dates specified in the leases which indicate when the percentage rent is due.

Recoveries from tenants for real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period that the applicable costs are incurred. The Company recognizes differences between estimated recoveries and the final billed amounts in the subsequent year. Other revenues primarily consist of fee income which relates to property management services and other related services and is recognized in the period in which the service is performed, licensing agreement revenues which are recognized as earned, and the proceeds from sales of development land which are generally recognized at the closing date.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

Tenant Accounts Receivable

The allowance for doubtful accounts reflects the Company’s estimate of the amounts of the recorded accounts receivable at the balance sheet date that will not be recovered from cash receipts in subsequent periods. The Company’s policy is to record a periodic provision for doubtful accounts based on total revenues. The Company also periodically reviews specific tenant balances and determines whether an additional allowance is necessary. In recording such a provision, the Company considers a tenant’s creditworthiness, ability to pay, probability of collections and consideration of the retail sector in which the tenant operates. The allowance for doubtful accounts is reviewed periodically based upon the Company’s historical experience.

Investment in Real Estate – Carrying Value of Assets

The Company maintains a diverse portfolio of real estate assets. The portfolio holdings have increased as a result of both acquisitions and the development of Properties and have been reduced by selected sales of assets. The amounts to be capitalized as a result of acquisitions and developments and the periods over which the assets are depreciated or amortized are determined based on the application of accounting standards that may require estimates as to fair value and the allocation of various costs to the individual assets. The Company allocates the cost of the acquisition based upon the estimated fair value of the net assets acquired. The Company also estimates the fair value of intangibles related to its acquisitions. The valuation of the fair value of the intangibles involves estimates related to market conditions, probability of lease renewals and the current market value of in-place leases. This market value is determined by considering factors such as the tenant’s industry, location within the Property, and competition in the specific market in which the Property operates. Differences in the amount attributed to the fair value estimate for intangible assets can be significant based upon the assumptions made in calculating these estimates.

Depreciation and Amortization

Depreciation expense for real estate assets is computed using a straight-line method and estimated useful lives for buildings and improvements using a weighted average composite life of forty years and three to ten years for equipment and fixtures. Expenditures for leasehold improvements and construction allowances paid to tenants are capitalized and amortized over the initial term of each lease. Cash allowances paid to tenants that are used for purposes other than improvements to the real estate are amortized as a reduction to minimum rents over the initial lease term. Maintenance and repairs are charged to expense as incurred. Cash allowances paid in return for operating covenants from retailers who own their real estate are capitalized as contract intangibles. These intangibles are amortized over the period the retailer is required to operate their store.

Investment in Real Estate – Impairment Evaluation

Management evaluates the recoverability of its investment in real estate assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that recoverability of the asset is not assured.

The Company evaluates the recoverability of its investments in real estate assets to be held and used each quarter and records an impairment charge when there is an indicator of impairment and the undiscounted projected cash flows are less than the carrying amount for a particular Property. The estimated cash flows used for the impairment analysis and the determination of estimated fair value are based on the Company’s plans for the respective assets and the Company’s views of market and economic conditions. The estimates consider matters such as current and historical rental rates, occupancies for the respective Properties and comparable properties, sales contracts for certain land parcels and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the Company’s plans or its views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, could be substantial.

Sale of Real Estate Assets

The Company recognizes property sales in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” The Company generally records the sales of operating properties and outparcels using the full accrual method at closing, when the earnings process is deemed to be complete. Sales not qualifying for full recognition at the time of sale are accounted for under other appropriate deferral methods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

Investment in Real Estate – Held-for-Sale

The Company evaluates the held-for-sale classification of its real estate each quarter. Assets that are classified as held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell. Management evaluates the fair value less cost to sell each quarter and records impairment charges when required. An asset is generally classified as held-for-sale once management commits to a plan to sell the particular Property and has initiated an active program to market the asset for sale. The results of operations of these real estate Properties are reflected as discontinued operations in all periods reported.

On occasion, the Company will receive unsolicited offers from third parties to buy individual Properties. Under these circumstances, the Company will classify the particular Property as held-for-sale when a sales contract is executed with no contingencies and the prospective buyer has funds at risk to ensure performance.

Accounting for Acquisitions

The Company accounts for acquisitions of Properties in accordance with SFAS No. 141, “Business Combinations.” The fair value of the real estate acquired is allocated to acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, acquired in-place leases and the value of tenant relationships, based in each case on their fair values. Purchase accounting is applied to assets and liabilities related to real estate entities acquired based upon the percentage of interest acquired.

The fair value of the tangible assets of an acquired property (which includes land, building and tenant improvements) is determined by valuing the property as if it were vacant, based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of an acquired property using methods to determine the replacement cost of the tangible assets.

In determining the fair value of the identified intangible assets and liabilities of an acquired property, above-market and below-market lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease values and the capitalized below-market lease values are amortized as an adjustment to rental income over the initial lease term.

The aggregate value of in-place leases is determined by evaluating various factors, including an estimate of carrying costs during the expected lease-up periods, current market conditions, and similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses, and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs. The value assigned to this intangible asset is amortized over the remaining lease term plus an assumed renewal period that is reasonably assured.

The aggregate value of other acquired intangible assets include tenant relationships. Factors considered by management in assigning a value to these relationships include: assumptions of probability of lease renewals, investment in tenant improvements, leasing commissions, and an approximate time lapse in rental income while a new tenant is located. The value assigned to this intangible asset is amortized over the average life of the relationship.

Deferred Costs

The Company capitalizes initial direct costs in accordance with SFAS No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases,” and amortizes these costs over the initial lease term. The costs are capitalized upon the execution of the lease and the amortization period begins the earlier of the store opening date or the date the tenant’s lease obligation begins.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

Stock-Based Compensation

The Company expenses the fair value of stock awards in accordance with the fair value recognition provisions of SFAS No. 123(R), which expands and clarifies SFAS No. 123, “Accounting for Stock-Based Compensation.” The pronouncement requires companies to measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. The cost of the stock award is expensed over the requisite service period (usually the vesting period).

Cash and Cash Equivalents

For purposes of the statements of cash flows, all highly liquid investments purchased with original maturities of three months or less are considered to be cash equivalents. At September 30, 2008 and December 31, 2007, cash and cash equivalents primarily consisted of overnight purchases of debt securities. The carrying amounts approximate fair value.

Investment in Unconsolidated Real Estate Entities

The Company evaluates all joint venture arrangements for consolidation. The percentage interest in the joint venture, evaluation of control and whether a variable interest entity (“VIE”) exists are all considered in determining if the arrangement qualifies for consolidation.

The Company accounts for its investments in unconsolidated real estate entities using the equity method of accounting whereby the cost of an investment is adjusted for the Company’s share of equity in net income or loss beginning on the date of acquisition and reduced by distributions received. The income or loss of each joint venture investor is allocated in accordance with the provisions of the applicable operating agreements. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences between the carrying amount of the Company’s investment in the respective joint venture and the Company’s share of the underlying equity of such unconsolidated entities are amortized over the respective lives of the underlying assets as applicable.

The Company periodically reviews its investment in unconsolidated real estate entities for other than temporary declines in market value. Any decline that is not expected to be recovered in the next twelve months is considered other than temporary and an impairment charge is recorded as a reduction in the carrying value of the investment.

Supplemental Disclosure of Non-Cash Financing and Investing Activities

Non-cash transactions resulting from other accounts payable and accrued expenses for ongoing operations such as real estate improvements and other assets were $6,084 and $5,704 as of September 30, 2008 and December 31, 2007, respectively.

Share distributions of $12,094 and $18,120 and Operating Partnership distributions of $956 and $1,436 were declared, but not paid as of September 30, 2008 and December 31, 2007, respectively. Distributions for GRT’s 8.75% Series F Cumulative Preferred Shares of Beneficial Interest of $1,313 were declared, but not paid as of September 30, 2008 and December 31, 2007. Distributions for GRT’s 8.125% Series G Cumulative Preferred Shares of Beneficial Interest of $3,047 and $3,046 were declared, but not paid as of September 30, 2008 and December 31, 2007, respectively.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

New Accounting Pronouncements

In late 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141R, a revision of SFAS No. 141, “Accounting for Business Combinations.” This standard expands the use of fair value principles as well as the treatment of pre-acquisition costs. This standard is effective for fiscal years beginning after December 15, 2008 (and thus acquisitions after December 31, 2008). The Company is evaluating the impact of this standard as it relates to Company’s future acquisitions.

In late 2007, the FASB issued SFAS No. 160, “Reporting for Minority Interests.” Currently, minority interest is not part of shareholders’ equity. Under SFAS No. 160, minority interest will become part of shareholders’ equity. This change may affect key financial ratios, such as debt to equity ratios. This standard is effective no later than for fiscal years beginning after December 15, 2008. The Company is evaluating the impact of this standard as it relates to Company’s financial position, results of operations and financial ratios.

In February 2008, FASB issued Staff Position No. FAS 157-2 which provides for a one-year deferral of the effective date of SFAS No. 157, “Fair Value Measurements,” for non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company is evaluating the impact of this standard as it relates to the Company’s financial position and results of operations.

In March 2008, the FASB issued Statement No. 161 “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.” This Statement amends Statement No. 133 to provide additional information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. The Statement requires enhanced disclosures about an entity’s derivatives and hedging activities. Statement No. 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008. The Company is currently evaluating the application of this Statement and anticipates the Statement will not have an effect on its results of operations or financial position as the Statement only provides for new disclosure requirements.

In October 2008, FASB issued Staff Position No. FAS 157-3, which clarifies the application of FASB Statement No. 157 Fair Value Measurements. Staff Position No. 157-3 provides guidance in determining the fair value of a financial asset when the market for that financial asset is not active. The Company is evaluating the impact of this standard as it relates to the Company’s financial position and results of operations.

Reclassifications

Certain reclassifications of prior period amounts, including the presentation of the Statement of Operations required by SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” have been made in the financial statements in order to conform to the 2008 presentation.

3.	Real Estate Assets Held-for-Sale

SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less costs to sell. As of September 30, 2008, the Company has classified two Malls (Eastland Mall (North Carolina) and The Great Mall of the Great Plains) and one Community Center (Ohio River Plaza) as held-for-sale. The financial results, including any impairment charges for these Properties, are reported as discontinued operations in the Consolidated Statements of Operations and the net book value of the assets are reflected as held-for-sale on the Consolidated Balance Sheets. The table below provides information on the held-for-sale assets.

	September 30, 2008		December 31, 2007
Number of Properties held-for-sale		3		4
Real estate assets held-for-sale	$	63,138	$	68,671
Mortgage notes payable associated with Properties held-for-sale	$	72,229	$	81,541

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

4.	Investment in and Advances to Unconsolidated Real Estate Entities

Investment in unconsolidated real estate entities as of September 30, 2008 consisted of an investment in three separate joint venture arrangements (the “Ventures”). The Company evaluated each of the Ventures individually to determine whether consolidation was required. For the Ventures listed below it was determined that they qualified for treatment as unconsolidated joint ventures and would be accounted for under the equity method of accounting. A description of each of the Ventures is provided below:

ORC Venture

Consists of a 52% interest held by GPLP in a joint venture (the “ORC Venture”) with an affiliate of Oxford Properties Group (“Oxford”), which is the global real estate platform for the Ontario (Canada) Municipal Employees Retirement System, a Canadian pension plan. The ORC Venture acquired the Company’s two joint venture Mall Properties, Puente Hills Mall (“Puente”) and Tulsa Promenade (“Tulsa”). The ORC Venture acquired Puente from an independent third party in December 2005 and acquired Tulsa from GPLP in March 2006.

Scottsdale Venture

Consists of a 50% common interest held by a GPLP subsidiary in a joint venture (the “Scottsdale Venture”) formed in May 2006 with an affiliate of the Wolff Company (“Wolff”). The purpose of the venture is to build a premium retail and office complex consisting of approximately 620,000 square feet of gross leasable space to be developed in Scottsdale, Arizona (the “Scottsdale Development”). The Company and Wolff each contributed an initial investment of $10,750 to the Scottsdale Venture, which investment represents common equity contributions of each party. From January 2008 to May 2008, the Company made cumulative preferred investments of $14,000 in the Scottsdale Venture with no corresponding investment by Wolff. This preferred investment was in addition to the $4,000 cumulative preferred investment made by the Company during 2007. On May 27, 2008, the Company received a payment from the Scottsdale Venture in the amount of approximately $18,801, which represented a return of all of the Company’s preferred investment as of the date of payment as well as the full amount of the then accrued return on the Company’s preferred investment. From June 2008 to September 2008, the Company made cumulative preferred investments in the Scottsdale Venture in the amount of $28,000. The Company received payments from the Scottsdale Venture in the amount of approximately $6,894 and $3,055 on July 7, 2008 and August 1, 2008, respectively, representing a partial return of its preferred investment. As of September 30, 2008, the preferred investment in the Scottsdale Venture is approximately $18,051 and is eligible to receive a weighted average preferred return of up to 20.66%. The Company’s total investment in the Scottsdale Venture is approximately $28,801.

Surprise Venture

Consists of a 50% interest held by a GPLP subsidiary in a joint venture (the “Surprise Venture”) formed in September 2006 with the former landowner of the Property that is to be developed. The Surprise Venture is in the process of developing 25,000 square feet of retail space on a five-acre site located in an area northwest of Phoenix, Arizona.

The Company may provide management, development, construction, leasing and legal services for a fee to each of the Ventures described above. Each individual agreement specifies which services the Company is to provide. The Company recognized fee income of $1,005 and $518 for these services for the three months ended September 30, 2008 and 2007, respectively, and fee income of $3,049 and $1,339 for the nine months ended September 30, 2008 and 2007, respectively.

The net income or loss for each joint venture entity is allocated in accordance with the provisions of the applicable operating agreements. The summary financial information for the Company’s investment in unconsolidated entities, accounted for using the equity method, is presented below:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

	September 30, 2008		December 31, 2007
Balance Sheet
Assets:
Investment properties at cost, net	$	238,193	$	240,016
Construction in progress		88,831		22,055
Intangible assets (1)		8,681		10,156
Other assets		23,544		28,775
Total assets	$	359,249	$	301,002
Liabilities and members’ equity:
Mortgage notes payable	$	127,867	$	123,203
Intangibles (2)		8,617		10,520
Other liabilities		15,488		11,847
		151,972		145,570
Members’ equity		207,277		155,432
Total liabilities and members equity	$	359,249	$	301,002

Operating Partnership’s share of member’s equity	$	116,740	$	82,119

(1)

Includes value of acquired in-place leases.

(2)

Includes the net value of $294 and $390 for above-market acquired leases as of September 30, 2008 and December 31, 2007, respectively, and $8,911 and $10,910 for below-market acquired leases as of September 30, 2008 and December 31, 2007, respectively.

Members’ Equity to Company Investment in and Advances to Unconsolidated Entities:

	September 30, 2008		December 31, 2007
Members’ equity	$	116,740	$	82,199
Advances and additional costs		925		917

Investments in and advances to unconsolidated real estate entities	$	117,665	$	83,116

	For the Three Months Ended
	September 30, 2008			September 30, 2007
Statements of Operations
Total revenues	$	8,400		$	8,684
Operating expenses		4,666			4,587
Depreciation and amortization		2,973			2,168
Operating income		761			1,929
Other expenses, net		4			20
Interest expense, net		1,323			1,585
Net (loss) income		(566	)		324
Preferred dividend		8			8
Net (loss) income available from the Company’s unconsolidated real estate entities	$	(574	)	$	316

GPLP’s share of (loss) income from unconsolidated real estate entities	$	(299	)	$	164

	For the Nine Months Ended
	September 30, 2008			September 30, 2007
Statements of Operations
Total revenues	$	24,887		$	26,549
Operating expenses		13,059			12,027
Depreciation and amortization		7,231			6,612
Operating income		4,597			7,910
Other expenses, net		13			27
Interest expense, net		4,837			4,867
Net (loss) income		(253	)		3,016
Preferred dividend		23			23
Net (loss) income available from the Company’s unconsolidated real estate entities		(276	)	$	2,993

GPLP’s share of (loss) income from unconsolidated real estate entities	$	(144	)	$	1,557

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

5.	Investment in Joint Ventures – Consolidated

On October 5, 2007, an affiliate of the Company entered into an agreement with Vero Venture I, LLC to form Vero Beach Fountains, LLC (the “VBF Venture”). The purpose of the VBF Venture is to build an approximately 440,000 square foot premium lifestyle center in Vero Beach, Florida. The Company has contributed $5,000 in cash for a 50% interest in the VBF Venture. The economics of the VBF Venture require the Company to receive a preferred return and the right to receive 75% of the distributions from the VBF Venture until such time that the capital contributed by the Company is returned. The Company receives substantially all of the economics and provides the majority of the financial support related to the VBF Venture. In accordance with FASB Interpretation No. 46R, the Company is the primary beneficiary of the VBF Venture and therefore the venture is consolidated in the Company’s consolidated financial statements.

6.	Tenant Accounts Receivable

The Company’s accounts receivable is comprised of the following components:

Accounts Receivable – Assets Held-For-Investment	September 30, 2008			December 31, 2007

Billed receivables	$	15,221		$	17,453
Straight-line receivables		19,502			20,509
Unbilled receivables		8,127			8,638
Less: allowance for doubtful accounts		(8,832	)		(7,125	)
Net accounts receivable	$	34,018		$	39,475

Accounts Receivable – Assets Held-For-Sale (1)	September 30, 2008			December 31, 2007

Billed receivables	$	2,454		$	2,300
Straight-line receivables		399			329
Unbilled receivables		(68	)		1,032
Less: allowance for doubtful accounts		(1,265	)		(1,386	)
Net accounts receivable	$	1,520		$	2,275

(1) Included in non-real estate assets associated with discontinued operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

7.	Mortgage Notes Payable as of September 30, 2008 and December 31, 2007 consist of the following:

	Carrying Amount of						Interest				Interest	Payment	Payment at		Maturity
Description	Mortgage Notes Payable						Rate				Terms	Terms	Maturity		Date

	2008			2007			2008		2007
Fixed Rate:
Morgantown Mall Associates, LP	$	50,740		$	51,503			10.94%		6.89%	(h)	(a)	$	50,823	(h)
Grand Central, LP		46,362			47,001			7.18%		7.18%		(a)	$	46,065	February 1, 2009
Johnson City Venture, LLC		37,959			38,323			8.37%		8.37%		(a)	$	37,026	June 1, 2010
Polaris Center, LLC		39,568			39,969			8.20%		8.20%	(n)	(a)	$	38,543	(i)
Catalina Partners, LP		42,250			-			4.72%			(o)	(b)	$	42,250	April 23, 2011
Glimcher Ashland Venture, LLC		23,850			24,273			7.25%		7.25%		(a)	$	21,817	November 1, 2011
Dayton Mall Venture, LLC		54,270			54,983			8.27%		8.27%	(n)	(a)	$	49,864	(j)
Glimcher WestShore, LLC		92,362			93,624			5.09%		5.09%		(a)	$	84,824	September 9, 2012
PFP Columbus, LLC		137,804			139,692			5.24%		5.24%		(a)	$	124,572	April 11, 2013
LC Portland, LLC		129,373			131,069			5.42%		5.42%	(n)	(a)	$	116,922	(k)
JG Elizabeth, LLC		153,989			156,082			4.83%		4.83%		(a)	$	135,194	June 8, 2014
MFC Beavercreek, LLC		106,157			107,499			5.45%		5.45%		(a)	$	92,762	November 1, 2014
Glimcher SuperMall Venture, LLC		57,925			58,624			7.54%		7.54%	(n)	(a)	$	49,969	(l)
Glimcher Merritt Square, LLC		57,000			57,000			5.35%		5.35%		(c)	$	52,914	September 1, 2015
RVM Glimcher, LLC		50,000			50,000			5.65%		5.65%		(d)	$	44,931	January 11, 2016
WTM Glimcher, LLC		60,000			60,000			5.90%		5.90%		(b)	$	60,000	June 8, 2016
EM Columbus II, LLC		43,000			43,000			5.87%		5.87%		(e)	$	38,057	December 11, 2016
Tax Exempt Bonds (r)		19,000			19,000			6.00%		6.00%		(f)	$	19,000	November 1, 2028
		1,201,609			1,171,642

Other:
Fair value adjustments		(1,097	)		(973	)

Mortgage Notes Payable:	$	1,200,512		$	1,170,669

Properties Held-for-Sale
Mount Vernon Venture, LLC (p) (s)	$	-		$	8,634					7.41%
Charlotte Eastland Mall, LLC (p) (q)		42,229			42,907			13.50%		7.84%	(n)	(a)	$	42,302	(g)
GM Olathe, LLC (p) (q)		30,000			30,000			4.30%		6.35%	(m)	(b)	$	30,000	January 12, 2009

Mortgage Notes Payable Associated with Properties Held-for-Sale	$	72,229		$	81,541

(a)	The loan requires monthly payments of principal and interest.
(b)	The loan requires monthly payments of interest only.
(c)	The loan requires monthly payments of interest only until October 2010, thereafter principal and interest payments are required.
(d)	The loan requires monthly payments of interest only until February 2009, thereafter principal and interest payments are required.
(e)	The loan requires monthly payments of interest only until December 2008, thereafter principal and interest payments are required.
(f)	The loan requires semi-annual payments of interest.
(g)	The loan matures in September 2028, with an optional prepayment (without penalty) date on September 11, 2008. The Company elected not to prepay this nonrecourse loan while discussions with the loan servicer were still ongoing. The 13.5% interest rate went into effect after the optional prepayment date.
(h)	The loan matures in September 2028, with an optional prepayment (without penalty) date on September 11, 2008. The Company elected not to prepay the loan until the new financing on Morgantown Mall was in place, which occurred on October 14, 2008. The 10.94% interest rate went into effect after the optional prepayment date. The Company only incurred one month of interest at this rate.
(i)	The loan matures in June 2030, with an optional prepayment (without penalty) date on June 1, 2010.
(j)	The loan matures in July 2027, with an optional prepayment (without penalty) date on July 11, 2012.
(k)	The loan matures in June 2033, with an optional prepayment (without penalty) date on June 11, 2013.
(l)	The loan matures in September 2029, with an optional prepayment (without penalty) date on February 11, 2015.
(m)	Interest rate of LIBOR plus 165 basis points effectively fixed through a swap agreement at a rate of 4.30% and 6.35% at September 30, 2008 and December 31, 2007, respectively.
(n)	Interest rate escalates after optional prepayment date.
(o)	Interest rate of LIBOR plus 165 basis points fixed through a swap agreement at a rate of 4.72% at September 30, 2008.
(p)	Mortgage note payable associated with property held-for-sale as of December 31, 2007.
(q)	Mortgage note payable associated with property held-for-sale as of September 30, 2008.
(r)	The bonds were issued by the New Jersey Economic Development Authority as part of the financing for the development of the Jersey Gardens Mall site. Although not secured by the property, the loan is fully guaranteed by Glimcher Realty Trust.
(s)	This loan was paid off in February 2008.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

All mortgage notes payable are collateralized by certain Properties (owned by the respective entities) with net book values of $1,408,265 and $1,399,832 at September 30, 2008 and December 31, 2007, respectively. Certain of the loans contain financial covenants regarding minimum net operating income and coverage ratios. Management believes they are in compliance with all covenants at September 30, 2008. Additionally, at September 30, 2008 one of the loans contained cross-default provisions and is cross-collateralized with mortgages on two Properties owned by Morgantown Mall Associates, LP. Under such cross-default provisions, a default under any mortgage included in a cross-defaulted loan may constitute a default under all such mortgages under that loan and may lead to acceleration of the indebtedness due on each Property within the collateral pool. Additionally, $38,450 of mortgage notes payable relating to certain Properties have been guaranteed by GPLP as of September 30, 2008.

8.	Notes Payable

The Company’s $470,000 unsecured credit facility (“Credit Facility”) matures in December 2009 and has a one-year extension option available to the Company, subject to the satisfaction of certain conditions. It is expandable to $600,000, provided there is no default under the Credit Facility and that one or more participating lenders agrees to increase their funding commitment or one or more new participating lenders is added to the facility. The interest rate ranges from LIBOR plus 0.95% to LIBOR plus 1.40% depending upon the Company’s ratio of debt to total asset value. The Credit Facility contains customary covenants, representations, warranties and events of default, including maintenance of a specified minimum net worth requirement; a total debt to total asset value ratio; a secured debt to total asset value ratio; an interest coverage ratio; and a fixed charge coverage ratio. Management believes the Company is in compliance with all covenants as of September 30, 2008.

At September 30, 2008, the outstanding balance on the Credit Facility was $354,036. Additionally, $26,318 represents a holdback on the available balance for letters of credit issued under the Credit Facility. As of September 30, 2008, the unused balance of the Credit Facility available to the Company was $89,646 and the interest rate was 5.08%.

At December 31, 2007, the outstanding balance on the Credit Facility was $300,000. Additionally, $21,176 represented a holdback on the available balance for letters of credit issued under the Credit Facility. As of December 31, 2007, the unused balance of the Credit Facility available to the Company was $148,824 and the interest rate was 5.65%.

9.	Derivative Financial Instruments

The Company accounts for its derivatives and hedging activities under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” as amended by SFAS Nos. 138 “Accounting for Certain Derivative Instruments and Certain Hedging Activities” and 149 “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” During the three months ended September 30, 2008, the Company recognized additional other comprehensive income of $36 to adjust the carrying amount of the interest rate swaps to fair values at September 30, 2008, net of $324 in reclassifications to earnings for interest rate swap settlements. During the three months ended September 30, 2007, the Company recognized additional other comprehensive loss of $355 to adjust the carrying amount of the interest rate swaps to fair values at September 30, 2007, net of $(116) in reclassifications to earnings for interest rate swap settlements during the period and $(28) in minority interest participation. The interest rate swap settlements were offset by a corresponding reduction in interest expense related to the interest payments being hedged. During the nine months ended September 30, 2008, the Company recognized additional other comprehensive income of $1,058 to adjust the carrying amount of the interest rate swaps to fair values at September 30, 2008, net of $977 in reclassifications to earnings for interest rate swap settlements during the period. During the nine months ended September 30, 2007, the Company recognized additional other comprehensive loss of $239 to adjust the carrying amount of the interest rate swaps to fair values at September 30, 2007, net of $(267) in reclassifications to earnings for interest rate swap settlements during the period and $(19) in minority interest participation. The interest rate swap settlements were offset by a corresponding reduction in interest expense related to the interest payments being hedged.

The hedging strategy is to eliminate or reduce, to the extent possible, the volatility of cash flows. The following table summarizes the notional values and fair values of the Company’s derivative financial instruments as of September 30, 2008.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

	Notional		Interest
Hedge Type	Value		Rate		Maturity	Fair Value
Swap – Cash Flow	$	30,000		2.6500%	January 12, 2009	$	76
Swap – Cash Flow	$	70,000		2.5225%	February 16, 2010	$	529
Swap – Cash Flow	$	42,250		3.0700%	May 3, 2010	$	59

The derivative instruments were reported at their fair value of $664 and $(437) in accounts payable and accrued expenses at September 30, 2008 and December 31, 2007, respectively, with a corresponding adjustment to other comprehensive income for the unrealized gains and losses (net of minority interest participation). Over time, the unrealized gains and losses held in accumulated other comprehensive income will be reclassified to earnings. This reclassification will correlate with the recognition of the hedged interest payments in earnings. There was no hedge ineffectiveness during the nine months ended September 30, 2008.

To determine the fair values of derivative instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. Standard market conventions and techniques such as undiscounted cash flow analysis, replacement cost, and termination cost are used to determine fair value.

10.	Fair Value Measurements

On January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; and accordingly, the standard does not require any new fair value measurements of reported balances.

SFAS No. 157 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). The fair value hierarchy, as defined by SFAS No. 157, contains three levels of inputs that may be used to measure fair value as follows:

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company has derivatives that must be measured under the new fair value standard. The Company currently does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

Derivative financial instruments

Currently, the Company uses interest rate swaps to manage its interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. Based on these inputs the Company has determined that its interest rate swap valuations are classified within Level 2 of the fair value hierarchy.

To comply with the provisions of SFAS No. 157, the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2008, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The table below presents the Company’s liabilities measured at fair value on a recurring basis as of September 30, 2008, aggregated by the level in the fair value hierarchy within which those measurements fall.

	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance at September 30, 2008
Liabilities
Derivative instruments, net	$	-	$	664	$	-	$	664

The Company does not have any fair value measurements using significant unobservable inputs (Level 3) as of September 30, 2008.

11.	Stock Based Compensation

Restricted Common Stock

Shares of restricted common stock are granted pursuant to GRT’s 2004 Amended and Restated Incentive Compensation Plan (the “2004 Plan”). Shares issued primarily vest in one-third installments over a period of five years beginning on the third anniversary of the grant date. The restricted common stock value is determined by the Company’s closing market share price on the grant date. As restricted common stock represents an incentive for future periods, the Company recognizes the related compensation expense ratably over the applicable vesting periods.

For the nine months ended September 30, 2008, 90,333 shares of restricted common stock were granted. The related compensation expense for all restricted common stock issued for the three months ended September 30, 2008 and 2007 was $178 and $220, respectively, and $610 and $622 for the nine months ended September 30, 2008 and 2007, respectively. The amount of compensation expense related to unvested restricted shares that we expect to expense in future periods, over a weighted average period of 3.5 years, is $2,400 as of September 30, 2008.

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

Long Term Incentive Awards

During the first quarter of 2007, the Company adopted a new Long Term Incentive Plan for Senior Executives (the “Incentive Plan”). At the time of the adoption of the Incentive Plan, performance shares were allocated to certain senior executive officers. The total number of performance shares allocated to all participants was 104,300.

The compensation costs recorded relating to the Incentive Plan were calculated in accordance with SFAS No. 123(R) and were calculated using the following assumptions: risk free rate of 4.5%, volatility of 23.1% and a dividend yield of 7.05%. The fair value of the unearned portion of the performance share awards was determined utilizing the Monte Carlo simulation technique and will be amortized to compensation expense over the Performance Period (defined below). The fair value of the performance shares allocated under the Incentive Plan was determined to be $18.79 per share for a total compensation amount of $1,960 to be recognized over the Performance Period.

Whether or not a participant receives performance shares under the Incentive Plan is determined by: (i) the outcome of the Company’s total shareholder return (“TSR”) for its Common Shares of Beneficial Interest (“Common Shares”) during the period of January 1, 2007 to December 31, 2009 (the “Performance Period”) as compared to the TSR for the common shares of a selected group of sixteen retail oriented real estate investment companies (the “Peer Group”) and (ii) the timely payment of quarterly dividends by the Company during the Performance Period on its Common Shares at dividend rates no lower than those paid during fiscal year 2006 (the “Dividend Criterion”).

During 2008, the Company made a change in its dividend policy which precluded the Company from satisfying the Dividend Criterion under the Incentive Plan and paying awards under the Incentive Plan. Accordingly, compensation expense of $555 that was recorded prior to the dividend change was reversed during the first quarter of 2008. There were no adjustments to compensation expense associated with the Incentive Plan for the three months ended September 30, 2008. The amount of compensation expense related to the Incentive Plan for the three and nine months ended September 30, 2007 was $165 and $379, respectively.

Share Option Plans

Options granted under the Company’s share option plans generally vest over a three-year period, with options exercisable at a rate of 33.3% per annum beginning with the first anniversary of the grant date. The options generally expire on the tenth anniversary of the grant date. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes options pricing model and is amortized over the requisite vesting period. During 2008 the Company issued 121,750 options. The fair value of each option grant was calculated on the date of the grant with the following assumptions: weighted average risk free interest rate of 2.75%, expected annual lives of five years, annual dividend rates of $1.28 and weighted average volatility of 26.6%. The weighted average fair value of options issued during the nine months ended September 30, 2008 was $.58 per share. Compensation expense recorded related to the Company’s share option plans was $45 and $148 for the three months ended September 30, 2008 and 2007, respectively, and $176 and $400 for the nine months ended September 30, 2008 and 2007, respectively.

12.	Commitments and Contingencies

At September 30, 2008, there were approximately 3.0 million units of partnership interest in the Operating Partnership (“OP Units”) outstanding. These OP Units are redeemable, at the option of the holders, beginning on the first anniversary of their issuance. The redemption price for an OP Unit shall be, at the option of GPLP, payable in the following form and amount: (i) cash at a price equal to the fair market value of one Common Share of the Company or (ii) Common Shares at the exchange ratio of one share for each OP Unit. The fair value of the OP Units outstanding at September 30, 2008 is $29,728 based upon a per unit value of $9.95 at September 30, 2008 (based upon a five-day average of the Common Stock price from September 23, 2008 to September 29, 2008).

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

13.	Earnings Per Common Share (shares in thousands)

The presentation of basic EPS and diluted EPS is summarized in the table below:

	For the Three Months Ended September 30,
	2008								2007
						Per								Per
Basic EPS:	Income			Shares		Share			Income			Shares		Share
Income from continuing operations	$	1,811							$	1,933
Less: preferred stock dividends		(4,360	)							(4,360	)
Minority interest adjustments (1)		-								3,597
(Loss) income from continuing operations	$	(2,549	)		37,608	$	(0.07	)	$	1,170			37,551	$	0.03

Discontinued operations	$	(895	)						$	48,819
Minority interest adjustments (1)		-								(3,597	)
Discontinued operations	$	(895	)		37,608	$	(0.02	)	$	45,222			37,551	$	1.20

Net (loss) income to common shareholders	$	(3,444	)		37,608	$	(0.09	)	$	46,392			37,551	$	1.24

Diluted EPS:
Income from continuing operations	$	1,811			37,608				$	1,933			37,551
Less: preferred stock dividends		(4,360	)							(4,360	)
Minority interest adjustments		-								3,665
Operating partnership units					-								2,996
Options					-								84
Restricted shares					-								110
(Loss) income from continuing operations	$	(2,549	)		37,608	$	(0.07	)	$	1,238			40,741	$	0.03

Discontinued operations	$	(895	)		37,608	$	(0.02	)	$	48,819			40,741	$	1.20

Net (loss) income to common shareholders before minority interest	$	(3,444	)		37,608	$	(0.09	)	$	50,057			40,741	$	1.23

	For the Nine Months Ended September 30,
	2008								2007
						Per								Per
Basic EPS:	Income			Shares		Share			Income			Shares		Share
Income from continuing operations	$	11,329							$	5,163
Less: preferred stock dividends		(13,078	)							(13,078	)
Minority interest adjustments (1)		-								3,739
Loss from continuing operations	$	(1,749	)		37,595	$	(0.05	)	$	(4,176	)		37,120	$	(0.11	)

Discontinued operations	$	(642	)						$	50,138
Minority interest adjustments (1)		-								(3,739	)
Discontinued operations	$	(642	)		37,595	$	(0.02	)	$	46,399			37,120	$	1.25

Net (loss) income to common shareholders	$	(2,391	)		37,595	$	(0.06	)	$	42,223			37,120	$	1.14

Diluted EPS:
Income from continuing operations	$	11,329			37,595				$	5,163			37,120
Less: preferred stock dividends		(13,078	)							(13,078	)
Minority interest adjustments		-								3,317
Operating partnership units					-								2,996
Options					-								-
Restricted shares					-								-
Loss from continuing operations	$	(1,749	)		37,595	$	(0.05	)	$	(4,598	)		40,116	$	(0.11	)

Discontinued operations	$	(642	)		37,595	$	(0.02	)	$	50,138			40,116	$	1.25

Net (loss) income to common shareholders before minority interest	$	(2,391	)		37,595	$	(0.06	)	$	45,540			40,116	$	1.14

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share and unit amounts)

(1) The minority interest adjustment reflects the reclassification of the minority interest expense from continuing to discontinued operations for appropriate allocation in the calculation of the earnings per share for discontinued operations.

Options with exercise prices greater than the average share prices for the periods presented were excluded from the respective computations of diluted EPS because to do so would have been anti-dilutive. The number of such options was 1,360 and 471 as of September 30, 2008 and 2007, respectively.

14.	Discontinued Operations

Financial results of Properties the Company sold in previous periods and Properties that the Company classifies as held-for-sale as of September 30, 2008 are reflected in discontinued operations for all periods reported in the consolidated statements of operations. The table below summarizes key financial results for these operations:

	For the Three Months Ended September 30,
	2008			2007
Revenues	$	2,966		$	7,256
Operating expenses		(2,496	)		(5,942	)
Operating income		470			1,314
Interest expense, net		(1,365	)		(1,381	)
Net loss from operations		(895	)		(67	)
Impairment adjustment on real estate		-