10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2009

Commission File No. 001-13499

EQUITY ONE, INC.

(Exact name of registrant as specified in its charter)

Maryland	52-1794271
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1600 N.E. Miami Gardens Drive N. Miami Beach, Florida	33179
(Address of principal executive offices)	(Zip Code)

(305) 947-1664

(Registrant's telephone number, including area code)

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

Yes S     No ¨

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

Yes ¨     No ¨  N/A S

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  ¨    Accelerated filer  S     Non-accelerated filer  ¨     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 S

Applicable only to Corporate Issuers:

As of the close of business on May 5, 2009, 86,301,753 shares of the Company's common stock, par value $0.01 per share, were outstanding.

EQUITY ONE, INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED MARCH 31, 2009

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	Page
	Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008	1
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2009 and 2008	2
	Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2009 and 2008	3
	Condensed Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2009	4
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2009 and 2008	5
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	48
Item 4.	Controls and Procedures	49
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	Submission of Matters to a Vote of Security Holders	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
	Signatures	52

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

EQUITY ONE, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

March 31, 2009 (Unaudited) and December 31, 2008

(In thousands)

	March 31, 2009			December 31, 2008
ASSETS
Properties:
Income producing	$	2,290,026		$	1,900,513
Less: accumulated depreciation		(206,895	)		(196,151	)
Income-producing property, net		2,083,131			1,704,362
Construction in progress and land held for development		73,677			74,371
Properties, net		2,156,808			1,778,733
Cash and cash equivalents		3,183			5,355
Accounts and other receivables, net		8,052			12,209
Investment and advances in real estate joint ventures		11,724			11,745
Marketable securities		73,990			160,585
Goodwill		11,845			11,845
Other assets		104,467			55,791
TOTAL ASSETS	$	2,370,069		$	2,036,263
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Notes Payable
Mortgage notes payable	$	629,288		$	371,077
Unsecured revolving credit facilities		10,000			35,500
Unsecured senior notes payable		627,431			657,913
		1,266,719			1,064,490
Unamortized/unaccreted premium (discount) on notes payable		(25,340	)		5,225
Total notes payable		1,241,379			1,069,715
Other liabilities
Accounts payable and accrued expenses		29,344			27,778
Tenant security deposits		9,783			8,908
Deferred tax liabilities, net		54,903			1,409
Other liabilities		45,388			17,966
Total liabilities		1,380,797			1,125,776
Commitments and contingencies
Equity:
Stockholders’ equity of Equity One
Preferred stock, $0.01 par value – 10,000 shares authorized but unissued
Common stock, $0.01 par value – 100,000 shares authorized 76,655 and 76,198 shares issued and outstanding as of March 31, 2009 and December 31, 2008, respectively		769			762
Additional paid-in capital		977,515			967,514
Distributions in excess of retained earnings		(15,926	)		(36,617	)
Contingent consideration		323			-
Accumulated other comprehensive income (loss)		404			(22,161	)
Total stockholders’ equity of Equity One		963,085			909,498
Noncontrolling interest		26,187			989
Total stockholders' equity		989,272			910,487
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,370,069		$	2,036,263

See accompanying notes to the condensed consolidated financial statements.

1

EQUITY ONE, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

For the three months ended March 31, 2009 and 2008

(In thousands, except per share data)

(Unaudited)

	Three months ended
	March 31,
	2009			2008
REVENUE:
Minimum rent	$	53,215		$	47,975
Expense recoveries		14,423			13,664
Percentage rent		1,140			1,449
Management and leasing services		550			183
Total revenue		69,328			63,271
COSTS AND EXPENSES:
Property operating		18,922			16,067
Rental property depreciation and amortization		15,291			11,764
General and administrative		12,256			6,885
Total costs and expenses		46,469			34,716
INCOME BEFORE OTHER INCOME AND EXPENSE AND DISCONTINUED OPERATIONS:		22,859			28,555
OTHER INCOME AND EXPENSE:
Investment income		2,057			6,162
Equity in real estate joint ventures		(7	)		-
Other income		1,050			42
Interest expense		(19,563	)		(15,982	)
Amortization of deferred financing fees		(444	)		(429	)
Gain on acquisition of controlling interest in subsidiary		26,866			-
(Loss) on sale of real estate		-			(42	)
Gain on extinguishment of debt		8,691			2,380
INCOME FROM CONTINUING OPERATIONS BEFORE TAX DICONTINUED OPERATIONS:		41,509			20,686
Income tax benefit of taxable REIT subsidiaries		639			83
INCOME FROM CONTINUING OPERATIONS:	$	42,148		$	20,769
DISCONTINUED OPERATIONS:
Operations of income-producing properties sold or held for sale		31			85
Gain on disposal of income producing properties		1,178			-
Income from discontinued operations		1,209			85
NET INCOME	$	43,357		$	20,854
Net loss attributable to noncontrolling interest		476			-
NET INCOME ATTRIBUTABLE TO EQUITY ONE	$	43,833		$	20,854
EARNINGS PER COMMON SHARE - BASIC:
Continuing operations	$	0.55		$	0.28
Discontinued operations		0.02			-
	$	0.57		$	0.28
Number of Shares Used in Computing Basic Earnings per Share		76,764			73,324
EARNINGS PER COMMON SHARE – DILUTED:
Continuing operations	$	0.54		$	0.28
Discontinued operations		0.02			-
	$	0.56		$	0.28
Number of Shares Used in Computing Diluted Earning per Share		77,410			73,499

See accompanying notes to the condensed consolidated financial statements.

2

Condensed Consolidated Statements of Other Comprehensive Income

For the three months ended March 31, 2009 and 2008

(In thousands)

(Unaudited)

	Three months ended
	March 31,
	2009		2008
NET INCOME	$	43,357	$	20,854
OTHER COMPREHENSIVE INCOME:
Net unrealized holding gain (loss) on securities available for sale		3,641		(10,533	)
Reclassification adjustment for loss on sale of securities and cash flow hedges included in net income		18,773		15
Net realized gain of interest rate contracts included in net income		131		196
Net amortization of interest rate contracts		20		23
Other comprehensive income adjustment		22,565		(10,299	)
COMPREHENSIVE INCOME	$	65,922	$	10,555
Comprehensive loss attributable to noncontrolling interest		476		-
COMPREHENSIVE INCOME ATTRIBUTABLE TO EQUITY ONE	$	65,446	$	10,555

See accompanying notes to the condensed consolidated financial statements.

3

Condensed Consolidated Statements of Stockholders' Equity

For the three months ended March 31, 2009

(In thousands)

(Unaudited)

	Equity One Stockholders Equity
	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income			Non-controlling Interest			Contingent consideration		Total Equity
BALANCE, DECEMBER 31, 2008	$	762		$	967,514		$	(36,617	)	$	(22,161	)	$	-		$	-	$	909,498
Cumulative effect of change in accounting principle		-			-			-			-			989			-		989
BALANCE, JANUARY 1, 2009		762			967,514			(36,617	)		(22,161	)		989			-		910,487
Issuance of common stock		12			12,249			-			-			-			-		12,261
Stock issuance cost		-			(25	)		-			-			-			-		(25	)
Share-based compensation expense		-			3,196			-			-			-			-		3,196
Common stock repurchases		(5	)		(5,420	)		-			-			-			-		(5,425	)
Net income/(loss)		-			-			43,833			-			(476	)		-		43,357
Dividends paid on common stock		-			-			(23,142	)		-			-			-		(23,142	)
Dividends received by noncontrolling interest on EQY common stock holdings		-			-			-			-			28			-		28
Distributions of income to noncontrolling interest		-			-			-			-			(28	)		-		(28	)
Acquisition of DIM, Vastgoed N.V.		-			-			-			-			25,795			323		26,118
Purchase of subsidiary shares from noncontrolling interest		-			1			-			-			(121	)		-		(120	)
Other comprehensive income adjustment		-			-			-			22,565			-			-		22,565
BALANCE, MARCH 31, 2009	$	769		$	977,515		$	(15,926	)	$	404		$	26,187		$	323	$	989,272
See accompanying notes to the condensed consolidated financial statements.

4

EQUITY ONE, INC. AND SUBSIDIARIES

 Condensed Consolidated Statements of Cash Flows

 For the three months ended March 31, 2009 and 2008

 (In thousands)

 (Unaudited)

	Three months ended March 31,
	2009			2008
OPERATING ACTIVITIES:
Net income	$	43,357		$	20,854
Adjustments to reconcile net income to net cash provided by operating activities:
Straight line rent adjustment		(516	)		(271	)
Amortization of below market lease intangibles		(1,525	)		(1,109	)
Equity in income of joint ventures		7			-
Amortization of premium on investments held for sale		(173	)		-
Gain on acquisition of DIM Vastgoed		(26,866	)		-
Income tax benefit of taxable REIT subsidiaries		(639	)		-
Provision for losses on accounts receivable		1,019			646
Amortization of discount/premium on notes payable		591			(538	)
Amortization of deferred financing fees		444			429
Rental property depreciation and amortization		15,689			11,796
Stock-based compensation		3,196			1,634
Amortization of derivatives		20			23
(Gain)/loss on disposal of real estate and income-producing properties		(1,178	)		42
Gain on extinguishment of debt		(8,691	)		(2,380	)
Changes in assets and liabilities:
Accounts and other receivables		4,948			(65	)
Other assets		(7,282	)		(6,987	)
Accounts payable and accrued expenses		2,415			(4,258	)
Tenant security deposits		(51	)		(199	)
Other liabilities		(3,071	)		6,227
Net cash provided by operating activities		21,694			25,844
INVESTING ACTIVITIES:
Additions to and purchases of rental property		(2,238	)		(4,703	)
Land held for development		(3,410	)		(82	)
Additions to construction in progress		-			(4,902	)
Proceeds from disposal of real estate and rental properties		1,644			514
Decrease in cash held in escrow		-			46,226
Increase in deferred leasing costs		(972	)		(2,222	)
Advances to joint ventures		15			-
Investment in consolidated subsidiary		(916	)		-
Proceeds from repayment of notes receivable		-			8
Proceeds from sale of securities		72,048			250
Cash used to purchase securities		(10,719	)		(51	)
Net cash provided by investing activities		55,452			35,038

See accompanying notes to condensed consolidated financial statements.

5

EQUITY ONE, INC. AND SUBSIDIARIES

 Condensed Consolidated Statements of Cash Flows

 For the three months ended March 31, 2009 and 2008

 (In thousands)

 (Unaudited)

	Three months ended March 31,
	2009			2008
FINANCING ACTIVITIES:
Repayments of mortgage notes payable	$	(3,986	)	$	(2,742	)
Net (repayments) borrowings under revolving credit facilities		(26,770	)		(12,500	)
Repayment of senior debt		(21,827	)		(24,996	)
Proceeds from issuance of common stock		-			234
Repurchase of stock		(5,425	)		-
Stock issuance cost		(25	)		-
Cash dividends paid to stockholders		(23,142	)		(22,191	)
Net cash used in financing activities		(81,175	)		(62,195	)
Net (decrease) increase in cash and cash equivalents		(4,029	)		(1,313	)
Cash and cash equivalents through acquisition		1,857
Cash and cash equivalents at beginning of the period		5,355			1,313
Cash and cash equivalents at end of the period	$	3,183		$	0
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest (net of capitalized interest of $315 and $790 in 2009 and 2008, respectively)	$	2,934		$	20,162
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Change in unrealized holding gain (loss) on securities	$	10,312		$	(10,533	)
Change in fair value of hedges	$	-		$	-
Net cash paid for the acquisition od DIM is as follows:
Income producing properties	$	387,325		$	-
Intangible assets		42,267			-
Other assets		4,858			-
Mortgage notes payable		(230,969	)		-
Secured revolving credit facility		(1,270	)		-
Below market leases		(31,584	)		-
Deferred tax liability		(54,165	)		-
Other liabilities		(4,097	)		-
Net noncash assets acquired		112,365			-
Previous equity interest		(36,124	)		-
Issuance common stock of Equtiy One (866,373 shares)		(12,233	)		-
Contingent consideration		(323	)		-
Noncontrolling interest in DIM		(25,795	)		-
Gain on acquisition of DIM Vastgoed		(38,925	)		-
Cash acquired		1,857			-
Net cash paid for acquisition	$	822		$	-

See accompanying notes to condensed consolidated financial statements.

6

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

1. Organization and Basis of Presentation

Organization

Equity One, Inc. operates as a self-managed real estate investment trust (“REIT”) that principally acquires, renovates, develops and manages neighborhood and community shopping centers anchored by leading supermarkets, drug stores or discount retail store chains.  As of March 31, 2009, our consolidated property portfolio comprised 181 properties, including 167 shopping centers consisting of approximately 19.0 million square feet of gross leasable area (“GLA”), four development/redevelopment properties, six non-retail properties and four parcels held for development. Included in our portfolio at March 31, 2009 are 21 shopping centers consisting of approximately 2.6 million square feet of GLA owned by DIM Vastgoed, N.V. (“DIM”), a company organized under the laws of the Netherlands in which Equity One acquired a controlling interest on January 14, 2009. As of March 31, 2009, our core portfolio, which does not include DIM was 91.5% leased and included national, regional and local tenants. In addition, we currently own a 10% interest in GRI-EQY I, LLC (“GRI Venture”), which owns ten neighborhood shopping centers totaling approximately 1.4 million square feet of GLA as of March 31, 2009.  The GRI joint venture properties were 94.7% leased at March 31, 2009.  Additionally, we own a 20% interest in G&I VI Investment South Florida Portfolio, LLC (“DRA Venture”) which owns one office building and two neighborhood shopping centers totaling approximately 503,000 square feet of GLA as of March 31, 2009.  The DRA Venture’s properties were 65% leased at March 31, 2009.

As noted above, we acquired a controlling interest in DIM in the first quarter of 2009. DIM is a public company, the shares of which are listed on the NYSE Euronext Amsterdam stock exchange. We acquired our controlling stake by means of a stock exchange (the “DIM Exchange”) with another DIM shareholder that resulted in us increasing our voting control over DIM’s outstanding ordinary shares to 74.6% and an economic interest of 65%. Prior to this acquisition, we accounted for our 48% interest in DIM on December 31, 2008 as an available-for-sale security.  As part of this acquisition, we acquired net assets of $114.2 million, with a noncontrolling interest of $25.8 million, at a bargain purchase gain of $26.9 million. We are in the process of finalizing valuations of certain assets and liabilities; thus these provisional measurements are subject to change. The results of DIM’s operations have been included in our financial statements for the first quarter of 2009. A pro forma consolidated statement of operations has not been presented because it is impracticable to prepare such information.  Please refer to Note 7 for a complete description of the transaction and for additional detail on the accounting of this transaction in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (“FAS 141R”).

Basis of Presentation

The condensed consolidated financial statements include the accounts of Equity One, Inc. and its wholly-owned subsidiaries, DIM and those other entities where we have financial and operating control. As noted above, we did not consolidate DIM until the quarter ended March 31, 2009 when we acquired a majority stake in DIM; accordingly,  no prior period amounts are presented for DIM.

Equity One, Inc. and its subsidiaries, are hereinafter referred to as “the consolidated companies”, the “Company”, “we”, “our”, “us” or similar terms.  All significant intercompany transactions and balances have been eliminated in consolidation. Certain prior-period data have been reclassified to conform to the current period presentation.

The condensed consolidated financial statements included in this report are unaudited.  In our opinion, all adjustments considered necessary for a fair presentation have been included. The results of operations for the three month periods ended March 31, 2009 and 2008 are not necessarily indicative of the results that may be expected for a full year.

Our unaudited condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions of Form 10-Q. Accordingly, these unaudited condensed consolidated financial statements do not contain certain information included in our annual financial statements and notes. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2009.

7

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

On January 1, 2009, we adopted the provisions of FAS 160. The provisions of  FAS 160 establish accounting and reporting standards for the noncontrolling interest in a consolidated subsidiary. FAS 160 is being applied prospectively, except for the provisions related to the presentation of noncontrolling interests in the statement of stockholders’ equity. As of both March 31, 2009 and December 31, 2008, noncontrolling interests of $989,000 have been classified as a component of equity in the consolidated balance sheets. For the three months ended March 31, 2009, net loss attributable to noncontrolling interests of $476,000, is included in net income. Earnings per share has not been affected as a result of the adoption of FAS 160.

On January 1, 2009, we adopted FSP No. EITF 03-6-1. The provisions of FSP No. EITF 03-6-1 require that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents (such as shares of restricted stock granted by us) be considered participating securities. Because the awards are participating securities, we are required to apply the two-class method of computing basic and diluted earnings per share (the “Two-Class Method”). The retrospective application of the provisions of FSP No. EITF 03-6-1 did not have a material change on any prior-period earnings per share amounts previously reported or on the three months ended March 31, 2009.

The accompanying 2008 condensed consolidated financial statements and the 2008 financial information have been retrospectively adjusted so that the basis of presentation is consistent with that of the 2009 financial information. This retrospective adjustment  reflects (i) the adoption of FASB No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51 (“FAS 160”), and (ii) the adoption of FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP No. EITF 03-6-1”).

2. Summary of Significant Accounting Policies

Revenue Recognition

Rental income includes minimum rents, expense reimbursements, termination fees and percentage rental payments.  Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis.  As part of the leasing process, we may provide the lessee with an allowance for the construction of leasehold improvements.  Leasehold improvements are capitalized and recorded as tenant improvements and depreciated over the shorter of the useful life of the improvements or the lease term.  If the allowance represents a payment for a purpose other than funding leasehold improvements, or in the event we are not considered the owner of the improvements, the allowance is considered a lease incentive and is recognized over the lease term as a reduction to rental revenue.  Factors considered during this evaluation include, among others, the type of improvements made, who holds legal title to the improvements, and other controlling rights provided by the lease agreement.  Lease revenue recognition commences when the lessee is given possession of the leased space and there are no contingencies offsetting the lessee’s obligation to pay rent.

Many of the lease agreements contain provisions that require the payment of additional rents based on the respective tenant’s sales volume (contingent or percentage rent) and substantially all contain provisions that require reimbursement of the tenant’s share of real estate taxes, insurance and common area maintenance costs, or CAM.  Revenue based on a percentage of tenant’s sales is recognized only after the tenant exceeds their sales breakpoint.  Revenue from tenant reimbursements of taxes, CAM and insurance is recognized in the period that the applicable costs are incurred in accordance with the lease agreements.

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments.  The computation of this allowance is based on an assessment of the tenant’s payment history and current credit quality using the specific identification method.

We recognize gains or losses on sales of real estate in accordance with FASB Statement No. 66 Accounting for Sales of Real Estate (“FAS 66”).  Profits are not recognized until (a) a sale has been consummated; (b) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; (c) our receivable, if any, is not subject to future subordination; and (d) we have transferred to the buyer the usual risks and rewards of ownership, and we do not have a substantial continuing involvement with the property.  The sales of income producing properties where we do not have a continuing involvement are presented in the discontinued operations section of our condensed consolidated statements of operations.

8

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

We are engaged by two joint ventures to provide asset management, property management, leasing, construction and similar services with respect to the ventures’ respective assets.  We receive fees for our services, including a property management fee calculated as a percentage of gross revenues received, and recognize these fees as the services are rendered.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Properties

Income-producing properties are stated at cost, less accumulated depreciation and amortization. All costs related to acquisitions are expensed when incurred.

Depreciation and amortization expense is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings and improvements, the minimum lease term or economic useful life for tenant improvements (whichever is shorter), and five to seven years for furniture and equipment. Expenditures for ordinary maintenance and repairs are expensed to operations as they are incurred.  Significant renovations and improvements that improve or extend the useful life of assets are capitalized.  The useful lives of amortizable intangible assets are evaluated each reporting period with any changes in estimated useful lives accounted for over the revised remaining useful life.

Construction in Progress and Land Held for Development

Properties also include construction in progress and land held for development.  These properties are carried at cost, and no depreciation is recorded.  Properties undergoing significant renovations and improvements are considered under development.  All direct and indirect costs related to development activities are capitalized into construction in progress and land held for development on our condensed consolidated balance sheets.  Costs incurred include predevelopment expenditures directly related to a specific project, including development and construction costs, interest, insurance and real estate tax expense.  Indirect development costs include employee salaries and benefits, travel and other related costs that are directly associated with the development of the property.  The capitalization of such expenses ceases when the property is ready for its intended use and has reached stabilization but no later than one-year from substantial completion of construction activity.  If we determine that a project is no longer viable, all predevelopment project costs are immediately expensed.  Similar costs related to properties not under development are expensed as incurred.

Our method of calculating capitalized interest is based upon applying our weighted average borrowing rate to that portion of actual costs incurred.  Total interest expense capitalized to construction in progress and land held for development was $315,000 and $790,000 for the three months ended March 31, 2009 and 2008, respectively.

Business Combinations

On January 1, 2009, we adopted the provisions of FAS 141R (revised 2007) and are applying such provisions prospectively to business combinations that have an acquisition date of January 1, 2009 or thereafter. FAS 141R establishes principles and requirements for how an acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures goodwill acquired in a business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In addition, FAS 141R requires that changes in the amount of acquired tax attributes be included in our results of operations.

9

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

While FAS 141R applies only to business combinations with an acquisition date after its effective date, the amendments to FASB Statement No. 109, Accounting for Income Taxes (“FAS 109”), with respect to deferred tax valuation allowances and liabilities for income tax uncertainties, have been applied to all deferred tax valuation allowances and liabilities for income tax uncertainties recognized in prior business combinations. We have applied the provisions of FAS 141R to the DIM Stock Exchange, resulting in the consolidation of DIM in our financial statements for the 2009 first quarter. Please refer to Note 7 for detailed description of the transaction, the consideration paid, the net assets acquired and the bargain purchase gain recorded. Additionally, when we purchase real estate properties, we allocate the initial purchase price of assets acquired (net tangible and identifiable intangible assets) and liabilities assumed based on their relative fair values at the date of acquisition pursuant to the provisions of FAS 141R. 

Our initial fair value purchase price allocations may be refined as additional information regarding fair values of the assets acquired and liabilities assumed is received. We allocate the purchase price of the acquired properties to land, building, improvements and intangible assets.  There are four categories of intangible assets to be considered:  (1) in-place leases; (2) above and below-market value of in-place leases; (3) lease origination costs and (4) customer relationships.  The aggregate value of other acquired intangible assets, consisting of in-place leases, is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates over (ii) the estimated fair value of the property as-if-vacant, determined as set forth above.  The value of in-place leases exclusive of the value of above-market and below-market in-place leases is amortized to expense over the remaining non-cancelable periods of the respective leases.  If a lease were to be terminated prior to its stated expiration, all unamortized (unaccreted) amounts relating to that lease would be written off.

Land is valued utilizing the sales comparison (market) approach to value. Using the sales comparison approach, we developed the value by comparing the subject property to similar, recently sold properties in the surrounding or competing area.

The “as if vacant” value of the building improvements is calculated using two approaches to value: (1) a cost approach utilizing the current replacement cost; and (2) an income approach under a hypothetical go-dark scenario. The go-dark income approach is a residual approach to valuing the building improvements as if vacant and serves as a relevant check against the depreciated replacement cost calculated via the cost approach.

The value of in-place leases is estimated based on the fair value of at-market in-place leases considering the cost of acquiring similar leases, the foregone rents associated with the lease-up period and carrying costs associated with the lease-up period.  Intangible assets associated with at-market in-place leases are amortized as additional lease expense over the remaining contractual lease term.

Above-market and below-market in-place lease values for acquired properties are computed based on the present value of the difference between the contractual amounts to be paid pursuant to the leases negotiated and in-place at the time of acquisition and our estimate of fair market lease rates for the property or comparable property, measured over a period equal to the remaining contractual lease period.  The value of above-market lease assets is amortized as a reduction of rental income over the remaining terms of the respective leases.  The value of below-market lease liabilities is accreted as an increase to rental income over the remaining terms of the respective leases.

Lease origination costs consist of leasing commissions, legal, and marketing expenses. Each of these items is valued by first estimating the prevailing market cost associated with each in-place lease and then calculating a theoretical remaining unamortized portion of this expense, based on straight-line amortization and depreciation. Because lease origination costs are “sunk” at the outset of the lease, the unamortized portion is not subject to discounting.

We evaluate business combinations to determine the value, if any, of customer relationships separate from customer contracts (leases).  Other than as discussed above, we have determined that our real estate properties do not have any other significant identifiable intangibles assets or liabilities.

The results of operations of acquired properties are included in our financial statements as of the dates they are acquired.  The intangibles associated with property acquisitions are included in other assets and other liabilities in our condensed consolidated balance sheets.  In the event that a tenant terminates its lease, all unamortized costs are written-off as a charge to income statement. The adoption of the provisions of FAS 141R did not affect our historical consolidated financial statements.

10

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Investments in Joint Ventures

We analyze our joint ventures and other investments under FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46R”), an interpretation of Accounting Research Bulletin No. 51 (“ARB No. 51”), as well as EITF No. 04-5, “Determining Whether a General Partner, or General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-5”) and the American Institute of Certified Public Accountants (AICPA) Statement of Position 78-9, “Accounting for Investments in Real Estate Ventures” (“SOP 78-9”), to determine whether the entity should be consolidated. If it is determined that these investments do not require consolidation because the entities are not variable interest entities (“VIEs”) in accordance with FIN 46R, we are not considered the primary beneficiary of the entities determined to be VIEs, we do not have voting control, and/or the limited partners (or non-managing members) have substantive participatory rights, then the selection of the accounting method used to account for our investments in unconsolidated joint ventures is generally determined by our voting interests and the degree of influence we have over the entity.

We use the equity method of accounting for investments in unconsolidated joint ventures when we own more than 20% but less than 50% and have significant influence but do not have a controlling financial interest, or if we own less than 20% but have determined that we have significant influence. Under the equity method, our proportionate share of earnings or losses earned by the joint venture is recognized in equity in income (loss) of unconsolidated joint ventures in the accompanying consolidated statements of operations.

Noncontrolling Interest

In December 2007, the FASB issued FAS 160 to improve the relevance, comparability, and transparency of the financial information by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. We have adopted these standards as of January 1, 2009 on a prospective basis and have retrospectively applied the presentation and disclosure requirements for all periods presented herein. See Note 8 for more information regarding the effects of this statement on current period results and the retrospective presentation and disclosure of prior periods.

Properties Held for Sale

Under FASB Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“FAS 144”), the definition of a component of an entity, assuming no significant continuing involvement, requires that income-producing properties that are sold or classified as held-for-sale be accounted for as discontinued operations.  Accordingly, the results of operations of income-producing properties disposed of or classified as held-for-sale for which we have no significant continuing involvement are reflected as discontinued operations.  Given the nature of real estate sales contracts, it is customary for such contracts to allow potential buyers a period of time to evaluate the property prior to becoming committed to its acquisition.  In addition, certain conditions to the closing of a sale, such as financing contingencies, etc., often remain following the completion of the buyer’s due diligence review.  As a result, properties under contract may not close within the expected time period, or may not close at all.  However, notwithstanding these conditions, if we determine that the property meets the criteria of FAS 144 and is likely to close within the specified time requirements, we classify a property as “discontinued operations” following completion of the buyer’s due diligence review.  Otherwise, if we are unable to make such a determination, we do not classify a property as “discontinued operations” until all buyer contingencies are removed or it is sold.

Long-lived Assets

Our properties are reviewed for impairment if events or changes in circumstances indicate that the carrying amount of the property may not be recoverable.  If there is an event or change in circumstance indicating the potential for impairment in the value of a property, we evaluate our ability to recover our net investment in the long-lived assets by comparing the carrying value (net book value) of such asset to the estimated future undiscounted cash flows over their expected useful life.  Future cash flow estimates are based on probability-weighted projections for a range of possible outcomes.

11

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Cash and Cash Equivalents

We consider liquid investments with a purchase date life to maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable include amounts billed to tenants and accrued expense recoveries due from tenants.  We evaluate the probability of collection for these receivables and adjust the allowance for doubtful accounts to reflect amounts estimated to be uncollectible.  The allowance for doubtful accounts was approximately $3.8 million and $3.1 million at March 31, 2009 and December 31, 2008, respectively.

Securities

Our investments in securities are classified as available-for-sale and recorded at fair value based on current market prices. Temporary changes in the fair value of the equity and debt investments are included on our consolidated balance sheets in accumulated other comprehensive income (loss).  If a decline in fair value is other than temporary, then impairment is recognized in earnings and in retained earnings. We evaluate our investments in available-for-sale securities for other than temporary declines each reporting period in accordance with applicable accounting standards.

During the three months ended March 31, 2009, $54.4 million of short term debt securities matured and $17.3 million were sold at a net loss of $43,000. As of March 31, 2009, our total investment in these debt securities, which have various maturities through January 2010 and are classified as available-for-sale, was $60.9 million.  Interest earned on these securities was $1.4 million during the three months ended March 31, 2009. 

During the three months ended March 31, 2009, we purchased 2.1 million shares of various REIT equity securities.  As of March 31, 2009, our total investment in these REIT securities, which are classified as available-for-sale, was $12.8 million.

The following table reflects the fair value of our investments, together with the realized losses and unrealized losses that are not deemed other-than-temporarily impaired:

	March 31,								December 31,
	2009								2008
	(In thousands)								(In thousands)
	Fair		Realized			Unrealized			Fair		Realized			Unrealized
Investment	Value		(Loss)			(Loss)/Gain			Value		(Loss)			Loss
Equity securities	$	13,074	$	-		$	1,880		$	32,210	$	(33,171	)	$	(16,446	)
Debt securities		60,916		(43	)		(750	)		128,375		-			(4,838	)
	$	73,990	$	(43	)	$	1,130		$	160,585	$	(33,171	)	$	(21,284	)

12

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Goodwill

Goodwill has been recorded to reflect the excess of cost over the fair value of net assets acquired in various business acquisitions.  We are required to perform annual, or more frequently in certain circumstances, impairment tests of our goodwill.  We have elected to test for goodwill impairment in November of each year.  The goodwill impairment test is a two-step process that requires us to make decisions in determining appropriate assumptions to use in the calculation.  The first step consists of estimating the fair value of each reporting unit and comparing those estimated fair values with the carrying values, which include the allocated goodwill.  If the estimated fair value is less than the carrying value, a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill.  The determination of reporting units (each property is considered a reporting unit) implied fair value of goodwill requires us to allocate the estimated fair value of the reporting unit to its assets and liabilities.  Any unallocated fair value represents the implied fair value of goodwill which is compared to its corresponding carrying amount.  During the periods presented, no impairment of goodwill was incurred.

We cannot predict the occurrence of certain future events that might adversely affect the reported value of goodwill that totaled approximately $11.8 million at March 31, 2009.  Such events include, but are not limited to, strategic decisions made in response to economic and competitive conditions, the impact of the economic environment on our tenant base, or a materially negative change in our relationships with significant tenants.

Deferred Costs and Intangibles

Deferred costs, intangible assets included in other assets, and intangible liabilities included in other liabilities consist of loan origination fees, leasing costs and the value of intangibles when a property was acquired.  Loan and other fees directly related to rental property financing with third parties are amortized over the term of the loan using the effective interest method.  Direct salaries, third-party fees and other costs incurred by us to originate a lease are capitalized and are being amortized using the straight-line method over the term of the related leases. Intangible assets consist of in-place lease values, tenant origination costs and above-market rents that were acquired in connection with the acquisition of the properties.  Intangible liabilities consist of below-market rents that are also acquired in connection with the acquisition of properties.  Both intangible assets and liabilities are amortized using the straight-line method over the term of the related leases.

Deposits

Deposits included in other assets are comprised of funds held by various institutions for future payments of property taxes, insurance and improvements, utility and other service deposits.

Use of Derivative Financial Instruments

We account for derivative and hedging activities in accordance with FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”, asamended and interpreted.  These accounting standards require us to measure derivatives, including certain derivatives embedded in other contracts, at fair value and to recognize them in the consolidated balance sheets as assets or liabilities, depending on our rights or obligations under the applicable derivative contract.  For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged item are recorded in earnings.  For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported in other comprehensive income and are subsequently reclassified into earnings when the hedged item affects earnings.  Changes in fair value of derivative instruments not designated as hedging instruments, and ineffective portions of cash flow hedges, are recognized in earnings in the current period.

We do not enter into derivative instruments for speculative purposes.  We typically require that the hedges or derivative financial instruments be effective in managing the interest rate or other risk exposure that they are designated to hedge.  For interest rate hedges, effectiveness is essential to qualify for hedge accounting.  Hedges that meet these hedging criteria are formally designated as such at the inception of the contract.  When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, resulting in  ineffectiveness, the change in the fair value of the derivative instrument will be included in earnings.  Additionally, any derivative instrument used for risk management that becomes ineffective is marked-to-market each period. We believe that our credit risk has been mitigated by entering into these agreements with major financial institutions.

13

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

The estimated fair value of our derivative financial instruments has been determined using available market information and appropriate valuation methodologies.  However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value.  Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange.  The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value.

On March 24, 2004, concurrently with the issuance of the $200.0 million 3.875% senior unsecured notes, we entered into a $100 million notional principal variable rate interest swap with an estimated fair value of approximately $925,000 as of March 31, 2009.  This swap converted fixed rate debt to variable rate based on the 6 month LIBOR in arrears plus 0.4375%, and was settled by us when it matured on April 15, 2009.

Earnings Per Share

Earnings per share is accounted for in accordance with FASB Statement No. 128, “Earnings per Share” (“FAS 128”), which requires a dual presentation of basic and diluted earnings per share on the face of the consolidated statement of operations.  Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings. We calculate the dilutive effect of share-based payments arrangements using the treasury stock method. This method assumes that the proceeds we receive from the exercise of stock options and non-vested stock are used to repurchase common shares in the market. The adoption of FASB Statement No. 123(R), Share-Based Payment, requires that we include, as assumed proceeds, the amount of compensation cost attributed to future services and not yet recognized, and the amount of tax benefits (both deferred and current), if any, that would be credited to additional paid-in capital assuming exercise of the options and vesting of the restricted shares. 

In June 2008, the FASB issued FSP No. EITF 03-6-1, which clarifies that unvested share-based payment awards that entitle their holders to receive non-forfeitable dividends, such as our restricted stock awards, are considered “participating securities.”  As participating securities, our shares of restricted stock will be included in the calculation of basic earnings per share.  Because the awards are considered participating securities under FASB Statement No. 128, Earnings per Share, we are required to apply the two-class method of computing basic and diluted earnings per share. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common shareholders.  Under the two-class method, earnings for the period are allocated between common shareholders and other security holders, based on their respective rights to receive dividends.

FSP No. EITF 03-6-1 requires retrospective application for periods prior to the effective date and as a result, all prior period earnings per share data presented herein have been adjusted to conform to these provisions. The adoption of FSP EITF No. 03-6-1 did not result in a material change to our previously reported basic EPS and diluted EPS for the three months ended March 31, 2008 and did not result in a material change to earnings per share for the three months ended March 31, 2009.

Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code (“Code”), commencing with our taxable year ended December 31, 1995.  To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we currently distribute at least 90% of our REIT taxable income to our stockholders.  Also, at least 95% of our gross income in any year must be derived from qualifying sources.  The difference between net income available to common stockholders for financial reporting purposes and taxable income before dividend deductions relates primarily to temporary differences, such as real estate depreciation and amortization, deduction of deferred compensation and deferral of gains on sold properties utilizing like kind exchanges.  It is our intention to adhere to these requirements and maintain our REIT status. As a REIT, we generally will not be subject to corporate level federal income tax on taxable income that we distribute currently to our stockholders.  If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years.  Even if we qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and property, and to federal income and excise taxes on our undistributed taxable income.

14

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Historically, the only provision for federal income taxes in our condensed consolidated financial statements relates to our consolidated taxable REIT subsidiaries (“TRSs”). During the three months ended March 31, 2009, our TRSs provided a net income tax benefit of $639,000.

Although DIM is organized under the laws of the Netherlands, it pays U.S. corporate tax based on its operations in the United States. In 2008, DIM did not pay any U.S. income tax, which reflected the benefit of net operating loss carry forwards (“NOLs”) in previous years. As of March 31, 2009, DIM has NOLs of $10.4 million remaining.

In June 2006, the FASB issued SFAS Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”(“FIN 48”).  In summary, FIN 48 requires that all tax positions subject to FASB Statement No. 109, “Accounting for Income Taxes,” be analyzed using a two-step approach.  The first step requires an entity to determine if a tax position would more likely than not be sustained upon examination.  In the second step, the tax benefit is measured as the largest amount of benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement.  FIN 48 was effective for fiscal years beginning after December 15, 2006, with any adjustment in a company’s tax provision being accounted for as a cumulative effect of accounting change in beginning equity.

We believe that we have appropriate support for the tax positions taken on our tax returns and that our accruals for income tax liabilities are adequate for all years still subject to tax audits after 2005.

Share-Based Payment

The following table reports share-based payment expense for the three months ended March 31, 2009 and 2008:

	Three Months Ended
	March 31,
	2009			2008
	(In thousands)
Restricted stock	$	2,052		$	1,164
Stock options		1,139			466
Employee stock purchase plan discount		4			3
Total cost		3,195			1,633
Less amount capitalized		(61	)		(114	)
Net share based payment expense	$	3,134		$	1,519

Restricted stock and option expense includes amounts for which vesting was accelerated under separation agreements.  Discounts offered to participants under our 2004 Employee Stock Purchase Plan represent the difference between market value of our stock on the purchase date and purchase price of shares as provided under the plan.  A portion of share-based compensation cost is capitalized as part of property-related assets.

15

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Segment Information

Our properties are community and neighborhood shopping centers located predominantly in high-growth and high-barrier to entry markets in the southern and northeastern United States.  Each of our centers is a separate operating segment, all of which have characteristics so similar that they are expected to have essentially the same future prospects and have, therefore, been aggregated and reported as one reportable segment.  No individual property constitutes more than 10% of our consolidated revenue, net income or assets.  The individual properties have been aggregated into one reportable segment based upon their similarities with regard to both the nature and economics of the centers, tenants and operational processes, as well as long-term average financial performance.  In addition, no shopping center is located outside the United States.

Concentration of Credit Risk

A concentration of credit risk arises in our business when a national or regionally-based tenant occupies a substantial amount of space in multiple properties owned by us.  In that event, if the tenant suffers a significant downturn in its business, it may become unable to make its contractual rent payments to us, exposing us to potential losses in rental revenue, expense recoveries, and percentage rent.  Further, the impact may be magnified if the tenant is renting space in multiple locations.  Generally, we do not obtain security from our national or regionally-based tenants in support of their lease obligations to us.  We regularly monitor our tenant base to assess potential concentrations of credit risk.  As of March 31, 2009, Publix Super Markets accounted for over 10%, or approximately $18.1 million, of our aggregate annualized minimum rent.  As of March 31, 2009, no other tenant accounted for over 5% of our annualized minimum rent.

Recent Accounting Pronouncements

In December 2007, the FASB issued FAS 141R, which replaces FAS 141. FAS 141R establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any resulting goodwill or bargain gain, and any noncontrolling interest in the acquiree. FAS 141R will require us to record fair value estimates of contingent consideration and certain other potential liabilities during the original purchase price allocation, expense acquisition costs as incurred, and does not permit certain restructuring activities to be recorded as a component of purchase accounting as previously allowed under EITF Issue No. 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. FAS 141R also provides for disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. FAS 141R is effective for the first annual reporting period beginning on or after December 15, 2008 and must be applied prospectively to business combinations completed on or after that date. We have adopted FAS 141R as of January 1, 2009, as required. We have determined the effect that the adoption of FAS 141R will have on our consolidated financial statements, and the effect will generally be limited to acquisitions in 2009, except for certain tax treatments of previous acquisitions. FAS 141R amended FASB Statement No. 109, Accounting for Income Taxes (“FAS 109”), and FIN 48. Previously, FAS 109 and FIN 48, generally required post-acquisition adjustments to business combination related deferred tax asset valuation allowances and liabilities related to uncertain tax positions to be recorded as an increase or decrease to goodwill. FAS 141R does not permit this accounting and generally will require any such changes to be recorded in current period income tax expense. Thus, because FAS 141R has been adopted, all changes to valuation allowances and liabilities related to uncertain tax positions established in acquisition accounting (whether the combination was accounted for under FAS 141 or FAS 141R) are recognized in current period income tax expense.

In December 2007, the FASB issued FAS 160 to improve the relevance, comparability, and transparency of the financial information by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. We have adopted this standard as of January 1, 2009 on a prospective basis and have retrospectively applied the presentation and disclosure requirements for all periods presented herein.

In March 2008, the FASB issued Statement No. 161, Disclosures About Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133, (“FAS 161”). FAS 161 expands the disclosure requirements in FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” regarding an entity’s derivative instruments and hedging activities. FAS 161 is effective for fiscal years beginning after December 1, 2008. The impact of adoption of FAS 161 did not have a material effect on our consolidated financial statements.

16

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2, ‘‘Effective Date of FASB Statement No. 157’’ which permitted a one-year deferral for the implementation of SFAS 157 with regard to nonfinancial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). On January 1, 2009, we adopted SFAS 157 as it relates to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on at least an annual basis. The adoption of SFAS 157, as it relates to nonfinancial assets and nonfinancial liabilities, had no impact on the financial statements. The provisions of SFAS 157 will be applied at such time as fair value measurement of a nonfinancial asset or nonfinancial liability is required, which may result in a fair value that is materially different than would have been calculated prior to the adoption of SFAS 157.

3. Property Dispositions

The following table provides a summary of property disposition activity during the three months ended March 31, 2009:

Date	Property	City, State	Area		Gross Sales Price		Gain / (loss) on Sale
			(In acres)		(In thousands)
March 31, 2009	Winchester Outparcel	Huntsville, AL		1.3	$	920	$	626
March 31, 2009	Waterstone Outparcel	Homestead, FL		0.6		788		552
	Total				$	1,708	$	1,178

As of March 31, 2009, there were no properties held for sale. The summary below of selected operating results for all previously disposed properties and current period dispositions disposed are as follows for the three months ended March 31, 2009 and 2008:

	Three Months Ended
	March 31,
	2009		2008
	(In thousands)
Rental Revenue	$	37	$	130
Expenses
Property operating expenses		5		13
Rental property depreciation and amortization		1		32
Gain (loss) on disposal of income producing property		1,178		-
Operations of income producing properties sold or held for sale	$	1,209	$	85

4. Investments in Joint Ventures

As of March 31, 2009, our investment in unconsolidated joint ventures, which is presented net of the deferred gain associated with the disposition of assets to the GRI Venture, was $8.4 million for the GRI Venture and $2.8 million for the DRA Venture. We own a 10% interest in the GRI Venture, which owns ten neighborhood shopping centers totaling approximately 1.4 million square feet of GLA, and a 20% interest in the DRA Venture, which owns one office building and two neighborhood shopping centers totaling approximately 503,000 square feet of GLA.

Equity in losses from these joint ventures totaled $7,000 for the three months ended March 31, 2009, and fees paid to us associated with these joint ventures totaled approximately $396,000 for the three months ended March 31, 2009. 

17

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

 5. Borrowings

The following table is a summary of our mortgage notes payable balances for periods ended March 31, 2009 and December 31, 2008:

Mortgage Notes Payable	March 31,		December 31,
	2009		2008
	(In thousands)
Fixed rate mortgage loans	$	629,288	$	371,077

The weighted average interest rate of the mortgage notes payable at March 31, 2009 and December 31, 2008 was 6.8% and 7.2%, respectively, excluding the effects of the net premium adjustment.

At March 31, 2009, our consolidated fixed rate mortgage loans include 22 mortgage loans related to DIM with a face value of $262.5 million.  In accordance with purchase accounting under FAS 141R, we are required to record these mortgages at fair value using a current market interest rate for this acquired debt.  Based on current market conditions, we determined the fair market value of these mortgages at our acquisition date was $231.3 million, resulting in a fair market value adjustment of $31.3 million that will be amortized into interest expense over the remaining lives of these mortgages.  The weighted average lives to maturity on these mortgages was 5.0 years as of March 31, 2009.  Refer to Note 7 for additional detail on the methods used to fair value assets and liabilities of DIM.

Our unamortized premium (discount) on our mortgage notes payable and unsecured senior notes payable at March 31, 2009 and December 31, 2008 consists of the following:

Unamortized premium / (discount)	March 31,			December 31,
	2009			2008
	(In thousands)
Mortgage notes payable	$	(24,293	)	$	6,360
Unsecured senior notes payable		(1,047	)		(1,135	)
	$	(25,340	)	$	5,225

The indentures under which our unsecured senior notes were issued have several covenants which limit our ability to incur debt, require us to maintain an unencumbered assets ratio above a specified level and limit our ability to consolidate, sell, lease, or convey substantially all of our assets to, or merge with any other entity.  These notes have also been guaranteed by most of our subsidiaries.

18

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Our outstanding unsecured senior notes and the fair value of our interest rate swap at March 31, 2009 and December 31, 2008 consist of the following:

Unsecured Senior Notes Payable	March 31,		December 31,
	2009		2008
	(In thousands)
3.875% Senior Notes, due 04/15/09	$	171,630	$	176,185
Fair value of interest rate swap		926		949
7.840% Senior Notes, due 01/23/12		10,000		10,000
5.375% Senior Notes, due 10/15/15		111,570		117,000
6.25% Senior Notes, due 01/15/17		104,130		115,000
6.00% Senior Notes, due 09/15/16		106,500		106,500
6.00% Senior Notes, due 09/15/17		122,675		132,279
	$	627,431	$	657,913

On March 24, 2004, we swapped $100.0 million notional principal of the $200.0 million, 3.875% senior notes to a floating interest rate based on the 6-month LIBOR in arrears plus 0.4375%. Subsequent to quarter end, we repaid the $171.6 million principal amount of 3.875% senior notes that remained outstanding and settled the related interest rate swap. The weighted average interest rate of our unsecured senior notes at March 31, 2009 and December 31, 2008 was 5.62% and 5.66%, respectively, excluding the effects of the interest rate swap and net premium adjustment. During the three months ended March 31, 2009, we purchased $30.5 million of our outstanding unsecured senior notes, with varying maturities which generated a gain on the early extinguishment of debt of $8.7 million.

The following table provides a summary of our unsecured revolving lines of credit balances at March 31, 2009 and December 31, 2008:

Unsecured revolving credit facilities	March 31,		December 31,
	2009		2008
	(In thousands)
Wells Fargo	$	10,000	$	35,500
City National Bank		-		-
	$	10,000	$	35,500

19

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

In October 2008, we amended and restated our unsecured revolving credit facility with a syndicate of banks for which Wells Fargo Bank, National Association is the sole lead arranger and administrative agent as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008.  The facility expires October 17, 2011 with a one-year extension option.

The facility contains customary covenants, including financial covenants regarding debt levels, total liabilities, interest coverage, fixed charge coverage ratios, unencumbered properties and permitted investments which may limit the amount available under the facility.

If a default under the facility exists, our ability to pay dividends would be limited to the amount necessary to maintain our status as a REIT unless the default is a payment default or bankruptcy event in which case we would be prohibited from paying any dividends.  The interest rate in effect at March 31, 2009 was 3.25%.  The facility also provides for the issuance of letters of credit, of which there were $12.7 million issued at March 31, 2009.

We also have a $15.0 million unsecured credit facility with City National Bank of Florida, on which there was no outstanding balance as of March 31, 2009 and December 31, 2008. This facility also provides for the issuance of $527,000 in outstanding letters of credit. In addition, we also have a $55,000 outstanding secured letter of credit with Bank of America.

As of March 31, 2009, the availability under the various credit facilities was approximately $218.8 million, net of outstanding balances and letters of credit and subject to the covenants in the loan agreement.

6.      Earnings Per Share

Earnings per share is accounted for in accordance with FAS 128, which requires a dual presentation of basic and diluted earnings per share on the face of the consolidated statement of operations.  Basic earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in our earnings.

As indicated in the summary of accounting policies in Note 1, FSP No. EITF 03-6-1, requires that we apply the two-class method of computing basic and diluted earnings per share for those securities, which are considered participating securities.  The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common stockholders.  Under the two-class method, earnings for the period are allocated between common stockholders and other security holders, based on their respective rights to receive dividends.

As described in Note 7, the DIM Exchange Agreement (as defined in Note7) provides that we acquire from a third party an additional 766,573 common shares, or 9.4% of the outstanding ordinary shares of in exchange for 536,601 shares of our common stock, depending on the market price at the time that the conditions to closing are satisfied. The estimated fair value of the DIM Exchange Agreement as of the acquisition date of January 14, 2009 is approximately $323,000 and is classified as contingent consideration in stockholders’ equity.  For calculating diluted earnings per share, however, we are required to consider the dilutive effect issuing of the DIM Exchange Agreement, which would require us to issue the additional 536,601 of our common stock shares. In addition, to appropriately present the dilutive nature of the DIM Exchange Agreement, we must reflect the incremental ownership and income we would receive if these shares were issued and exchanged for the DIM ordinary shares.  Accordingly, we are required to adjust our basic income used in our EPS calculation for the incremental gain or (loss) attributable to our increased ownership, as well as adjust our weighted average shares to include the additional shares issuance.

20

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

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

	Three Months Ended
	March 31,
	2009			2008
	(In thousands)
Income from continuing operations	$	42,148		$	20,769
Net loss attributable to noncontrolling interest		476			-
Allocation of undistributed earnings to unvested restricted share awards		(99	)		(172	)
Allocation of earnings associated with contingent DIM shares		(128	)		-
Income from continuing operations attributable to Equity One	$	42,397		$	20,597
Income from discontinued operations		1,209			85
Net income available to common stockholders - basic and diluted	$	43,606		$	20,682
Weighted Average Shares Outstanding — Basic		76,764			73,324
Walden Woods Village, Ltd		94			94
Restricted stock using the treasury method		69			35
Stock options using the treasury method		30			46
Contingent shares to be issued for DIM stock		453			-
Subtotal		646			175
Diluted earnings per share - weighted average shares		77,410			73,499

7. Acquisition of Controlling Interest in DIM Vastgoed N.V

On January 14, 2009 (the “Acquisition Date”) in accordance with the Stock Exchange Agreement between us and Homburg Invest Inc. and Homburg (Neth) Beheer B.V. (collectively, “Homburg”), dated January 9, 2009 (the “DIM Exchange Agreement”), we acquired ownership of 15.1% of the outstanding DIM ordinary shares in exchange for 866,373 shares of our common stock. As previously disclosed, DIM is a public company organized under the laws of the Netherlands, which operates a portfolio of 21 shopping center properties comprising approximately 2.6 million square feet in the southeastern United States.  In addition, we obtained from Homburg voting rights with respect to an additional 9.4 % of the outstanding DIM ordinary shares over which Homburg has voting power but does not currently own (the “Future Shares”) resulting, together with the 65.2% of DIM ordinary shares owned by us, in voting control over 74.6% of the outstanding DIM ordinary shares. Prior to the Acquisition Date, we accounted for our 48% interest in DIM on December 31,2008 as an available-for-sale security because of our inability to exert significant influence over DIM’s operating or financial policies and, based on DIM’s organizational and capital structure, we were unable to participate in the affairs of DIM’s supervisory board. Subsequent to the acquisition of the above referenced shares and voting rights, our management determined that we had obtained sufficient ownership to exert control over DIM and, as a result consolidated  DIM as of the Acquisition Date in accordance with FAS 141R.

21

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

The DIM Exchange Agreement provides for us to acquire from Homburg the Future Shares, if and when Homburg has acquired ownership thereof, in consideration for 536,601 shares of our common stock or, at our option, $11.50 per share in cash adjusted for any dividends paid on our shares and the Future Shares. The fair value of the Future Shares transaction of $323,000 was determined using Monte-Carlo simulation methodology to estimate fair values of the securities involved. These valuations of the securities considers various assumptions, including time to maturity, applicable market volatility factors, and current market and selling prices for the underlying securities which are traded on the open market. The value of the DIM Exchange Agreement of approximately $323,000 will be classified as contingent consideration within stockholders equity until consummation of the Future Shares acquisition.

This contingent stock exchange requires us to issue Homburg 536,601 shares of our common stock in exchange for 766,573 of DIM's ordinary shares if our common stock is trading below $20.00.  Likewise, the contingent stock exchange requires Homburg to provide us with 766,573 DIM ordinary shares in exchange for 536,601 shares of our common stock if our stock is trading above $16.50. The Agreement provides for a time-sensitive cash settlement option, solely and absolutely at our discretion, that takes precedence over the aforementioned stock exchange. This cash settlement option provides us the ability to pay Homburg cash of $11.50 per DIM ordinary share, adjusted for a dividend formula that considers our dividend and DIM's dividend, if any.

The following table summarizes the Acquisition Date fair value of the consideration paid for the controlling interest in DIM (in thousands):

Acquisition Date Fair Value
	(In Thousands)
Previous equity interest	$	36,945
Value of our common stock exchange (866,373 shares)		12,234
Contingent consideration		323
Total	$	49,502

Following the Acquisition Date, we recognized a loss of $12.1 million as a result of re-measuring to fair value our approximate 50% equity interest in DIM held before that date. The loss is included in the line item “Gain on acquisition of controlling interest in subsidiary” in the statement of operations for the three months ended March 31, 2009.  The fair value of the 866,373 shares of our Common Stock issued to Homburg under the DIM Exchange Agreement was determined on the basis of the closing market price on the New York Stock Exchange ($14.12 per share) of our Common Stock on the Acquisition Date.

We recognized approximately $3.9 million of acquisition related costs that were expensed as follows: (i) in connection with the other-than-temporary impairment loss recorded during the third quarter of 2008, approximately $2.2 million was expensed, (ii) during the fourth quarter of 2008 approximately $926,000 was recorded in general and administrative expense and (iii) during the quarter ended March 31, 2009 approximately $818,000 was recorded in general and administrative expense.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Acquisition Date. We are still in the process of finalizing valuations of certain assets and liabilities; thus, these provisional measurements are subject to change. See “Business Combinations” in Note 2 for the methods used to fair value the income producing properties and the related lease intangibles.

22

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Perliminary Estimated Fair Values
	(In thousands)
Income producing properties	$	387,325
Cash and cash equivalents		1,858
Accounts and other receivables		1,809
Intangible assets		42,267
Other assets		3,049
Total assets acquired	$	436,308
Mortgage notes payable		230,969
Secured revolving credit facility		1,270
Accounts payable and accrued expenses		1,081
Tenant security deposits		926
Below market leases		31,584
Deferred tax liability		54,165
Other liabilities		2,090
Total liabilities assumed	$	322,085
Net assets acquired	$	114,223
Noncontrolling interest in DIM	$	25,795

The fair values of the acquired intangible assets, all of which have definite lives and will be amortized, were provisionally assigned as follows: approximately $8.2 million to leasing commissions with a remaining weighted-average useful life of approximately 9.1 years, approximately $3.0 million to above-market leases with a remaining weighted-average useful life of approximately 4.9 years, approximately $30.5 million to in-place leases with a remaining weighted-average useful life of approximately 7.6 years; and $600,000 to lease origination costs with a remaining weighted-average useful life of approximately 5.5 years.

The below-market lease intangible liability has a remaining weighted-average useful life of approximately 11.3 years.

The gross amount due for the accounts and other receivables is $2.6 million, of which $675,000 is expected to be uncollectible.

The fair value of the mortgage notes payable was determined by using present value techniques and appropriate market interest rates on a loan-by-loan basis. We are not guaranteeing, collateralizing or otherwise directly assuming DIM’s debt. In valuing the mortgage notes at each property, we considered the occupancy level, market location, physical property condition, the asset class, cash flow, the loan-to-value (“LTV”) ratio and other pertinent factors. Due to the current disruption in the credit markets and other adverse economic conditions, the range of possible borrowing costs can vary significantly. Our fair value approach considered market quotes for retail shopping center assets which were adjusted based on the underlying LTV ratios of the assets securing the loans. Using this approach we valued the mortgage notes acquired using market interest rates ranging from 6% to 12% per year.

The fair value of the noncontrolling interest in DIM was measured on the basis of the closing market price ($8.99 per share) of DIM ordinary shares on the Acquisition Date multiplied by 2.9 million ordinary DIM shares outstanding that we do not own.

The amounts of revenue, expense and net loss for DIM included in our condensed consolidated statement of operations for the period ending March 31, 2009 are as follows:

23

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Revenue, expenses and net loss
	(In thousands)
Revenues	$	10,306
Property operating expenses		(2,622	)
Rental property depreciation & amortization		(4,455	)
General and administrative		(460	)
Interest expense		(4,891	)
Other income (expense)		1
Income taxes		751
Noncontrolling interest’s share	$	(476	)
Our share of the net loss	$	(894	)

The fair value of the identifiable assets acquired and liabilities assumed exceeded the fair value of the consideration transferred.  As a result, we recognized a provisional gain of $26.9 million, which is included in the line item “Gain on acquisition of controlling interest in subsidiary” in our condensed consolidated statement of operations for the three months ended March 31, 2009. We are still in the process of finalizing valuations for certain assets and liabilities; thus, the provisional measurements disclosed in the table above acquisition and the net loss are subject to change.

The pro forma consolidated statement of operations information required by FAS 141R has not been presented due to it being impracticable to prepare such information DIM reports under International Financial Reporting Standards (“IFRS”) as adopted by the European Union which differs from US GAAP in, among other respects, the treatment of tenant improvements and lease incentives, capitalization of property improvements and the recognition of straight-line rental income. To properly reflect the adjustments required to present pro forma information, we would have to evaluate on a lease-by-lease basis the adjustments needed to properly recognize revenues and expenses for a period of at least two years as well as to recreate the historical basis of income producing properties, and the related intangibles and then accurately track their related amortization, depreciation, and write offs for a period of at least two years.  In addition to recreating these balance sheet changes and income statement changes, the tax effect of all changes would have to be recreated using GAAP to tax differences previously not tracked by DIM. As a result of these factors, we believe it is impracticable to gather, analyze, and compile pro forma financial information. Management will however reassess whether such disclosure continues to remain impracticable in our subsequent reporting periods.

8. Noncontrolling Interest

Noncontrolling interests represent the portion of equity that we do not own in those entities that we consolidate as a result of having a controlling interest. In December 2007, FASB issued FAS 160, which, commencing with financial periods beginning after January 1, 2009, requires additional financial statement presentation and disclosure items which we have included in the accompanying financial statements.

We are involved in the following investment activities in which we have a controlling interest:

On January 1, 1999, Equity One (Walden Woods, Inc.), a wholly-owned subsidiary of ours, entered into a limited partnership as a general partner.  An income-producing shopping center (“Walden Woods Village”) was contributed by its owners (the “Minority Partners”), and we contributed 93,656 shares of our common stock (the “Walden Woods Shares”) to the limited partnership at an agreed-upon price of $10.30 per share.  Based on this per share price and the net value of property contributed by the Minority Partners, the limited partners received 93,656 partnership units.  We have entered into a redemption agreement with the Minority Partners whereby the Minority Partners can request that we purchase either their limited partnership units or any shares of common stock, which they received in exchange for their partnership units at a price of $10.30 per unit or per share at any time before January 1, 2014.  Because of the redemption agreement, we consolidate the accounts of the partnership with our financial statements.  We have also entered into a conversion agreement with the Minority Partners.

24

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Under the conversion agreement, following notice, the Minority Partners can convert their partnership units into Walden Woods Shares. In addition, under the terms of the limited partnership agreement, the Minority Partners do not have an interest in the Walden Woods Shares except to the extent of dividends received by the partnership for the shares originally contributed by us.  The retrospective application FAS 160 required that the noncontrolling interest of $989,000 related to our Walden Woods partnership be reclassified to equity and be clearly identified, labeled, and presented as separate from our equity. Also, in previously issued financial statements, a preference in earnings has been allocated to the Minority Partners to the extent of the distributions declared. Under FAS 160, the dividend income received by the partnership on the original shares of our common stock that we contributed and the subsequent distribution thereof to the minority partners will be recognized in equity and not reflected in the consolidated statement of operations. This change has been presented retrospectively and will be prospectively applied.

We have controlling interests in two joint ventures that, together, own our Sunlake development project.  We have funded all of the acquisition costs, are required to fund any necessary development and operating costs, receive an 8% preferred return on our advances, have reimbursement rights of all capital outlays upon disposition of the property, and are entitled to 60% of the profits thereafter.  The minority partners are not required to make contributions and, to date, have not contributed any capital.  One joint venture is under development and the other mixed-use joint venture is nearing completion of construction and has commenced leasing. Noncontrolling interest will not be recorded until the equity in the property surpasses our capital expenditures and cumulative preferred return.

As of March 31, 2009, we owned 5,360,826 ordinary shares of DIM (or depository receipts related thereto), representing 65.2% of DIM’s total outstanding ordinary shares, and had voting control over an additional 766,573 ordinary shares, which, together with the shares owned, represent voting control over 74.6% of DIM’s total outstanding ordinary shares. Noncontrolling interest was recorded based on the noncontrolling market capitalization at the Acquisition Date and will be adjusted on a prospective basis for earnings attributable to the noncontrolling interest.

The following details the effects of changes in our ownership interests in our subsidiaries on our equity.

	Three Months Ended
	March 31,
	2009		2008
	(In thousands)
Net income attributable to Equity One, Inc.	$	43,833	$	20,854
Increase in our paid-in-capital for the purchase of 13,564 DIM common shares		1		-
Net transfers from noncontrolling interest		1		-
Change from net income attributable to Equity One, Inc. and transfers from noncontrolling interest	$	43,834	$	20,854

25

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

9. Share-Based Payment Plans

As of March 31, 2009, we have awards outstanding under four share-based payment plans, including two plans that we assumed in connection with our merger with IRT Property Company in 2003.  While awards are outstanding under these plans, the Equity One 2000 Executive Incentive Compensation Plan is the primary plan under which current awards are granted.  The 2000 plan was adopted by our stockholders in June 2000 and amended in May 2002, July 2004 and June 2007.  The number of shares reserved for issuance under the plan is currently 8.5 million, of which approximately 3.3 million shares remain available for awards.

The term of each award is determined by the compensation committee of our board of directors (the “Committee”), but in no event can the term of any stock option or stock appreciation right (“SAR”) be longer than ten years from the date of the grant.  The vesting, if any, of the awards is determined by the Committee, in its sole and absolute discretion.  Dividends are paid on shares of restricted stock awarded and outstanding under the plan.  Certain options and share awards provide for accelerated vesting if there is a change in control.

For options granted after the January 1, 2006 adoption of FAS Statement No. 123R, Shared-Based Payment, we used the binomial option pricing model to determine the fair value of our stock options; however, effective January 1, 2008, we elected to use the Black-Scholes-Merton option-pricing model to determine prospectively the fair value of our stock options awarded after that date.  We determined that the Black-Scholes-Merton option-pricing model is an acceptable and widely used method that is more appropriate for us given our stock option granting practices, our limited history of option exercise patterns, and the immateriality of stock option expense to our net income.  The determination of the fair value of awards on the date of grant using an option-pricing model is affected by the price of our common stock as well as assumptions regarding a number of subjective variables.  These variables include our expected stock price volatility over the term of the awards, the expected life of the options and expected dividends.

We measure compensation cost for restricted stock awards based on the fair value of our common stock at the date of the grant and expense such amounts ratably over the vesting period.

The following table reports stock option activity during the three months ended March 31, 2009:

	Shares Under Option		Weighted-Average Exercise Price
	(In thousands)
Outstanding at December 31, 2008		2,475	$	23.32
Granted		480		11.84
Exercised		-		-
Forfeited or expired		-		-
Outstanding at March 31, 2009		2,995	$	21.46
Exercisable at March 31, 2009		1,031	$	23.02

26

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

The following table presents information regarding restricted stock activity during the three months ended March 31, 2009:

	Unvested Shares			Weighted-Average Price
	(In thousands)
Unvested at December 31, 2008		385		$	24.79
Granted		57			13.45
Vested		(50	)		23.09
Unvested at March 31, 2009		392		$	23.35

During the three months ended March 31, 2009, we granted 56,907 shares of restricted stock that are subject to forfeiture and vest over periods from two to four years.

The total vesting-date value of the 49,697 shares that vested during the three months ended March 31, 2009 was $573,600.

As of March 31, 2009, we had $10 million of total unrecognized compensation expense related to unvested share-based payment arrangements (options and restricted shares) granted under our plans.  This cost is expected to be recognized over a weighted average period of 1.9 years.

10. Equity

As part of a change in accounting principle due to our adoption of FAS 160, we reclassified  to equity $989,000 related to the noncontrolling portion of our Walden Woods down REIT partnership that was previously stated on our consolidated balance sheet between liabilities and equity. We also included a new caption in our statement of shareholders’ equity to present the total amount of noncontrolling interests represented in our equity.

In connection with the consolidation of DIM, we recognized approximately $25.8 million of noncontrolling interest in our equity representing the percentage of DIM that we did not control at the Acquisition Date. Subsequent changes to the noncontrolling equity balance will arise from allocation of subsidiary income or loss attributable to noncontrolling interests, or upon changes in our ownership of DIM.

In the three months ended March 31, 2009, we repurchased and retired 461,694 shares of our common stock at an average price of $11.75.

27

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

11. Condensed Consolidating Financial Information

Most of our subsidiaries have guaranteed our indebtedness under the unsecured senior notes and the revolving credit facility.  The guarantees are joint and several and full and unconditional.

Condensed Balance Sheet As of March 31, 2009	Equity One, Inc.			Combined Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
ASSETS	(In thousands)
Properties, net	$	1,015,043		$	274,508	$	867,257		$	-		$	2,156,808
Investment in affiliates		628,310			-		-			(628,310	)		-
Other assets		(70,409	)		213,367		70,303			-			213,261
Total Assets	$	1,572,944		$	487,875	$	937,560		$	(628,310	)	$	2,370,069
LIABILITIES
Mortgage notes payable	$	56,900		$	49,163	$	523,225		$	-		$	629,288
Unsecured revolving credit facilities		10,000			-		-			-			10,000
Unsecured senior notes payable		627,431			-		-			-			627,431
Unamortized/unaccreted premium/(discount) on notes payable		(308	)		30		(25,062	)		-			(25,340	)
Other liabilities		22,896			3,527		112,995			-			140,561
Total Liabilities		716,919			52,720		611,158			-			1,381,937
STOCKHOLDERS’ EQUITY		856,025			435,155		326,402			(628,310	)		988,272
Total Liabilities and Stockholders' Equity	$	1,572,944		$	487,875	$	937,560		$	(628,310	)	$	2,370,069

28

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Condensed Balance Sheet As of December 31, 2008	Equity One, Inc.			Combined Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminating Entries			Consolidated
	(In thousands)
ASSETS
Properties, net	$	1,019,154		$	274,587	$	484,992	$	-		$	1,778,733
Investment in affiliates		628,309			-		-		(628,309	)		-
Other assets		184,561			17,408		55,561		-			257,530
Total Assets	$	1,832,024		$	291,995	$	540,553	$	(628,309	)	$	2,036,263
LIABILITIES
Mortgage notes payable	$	57,491		$	49,951	$	263,635	$	-		$	371,077
Mortgage notes payable related to properties held for sale		-			-		-		-			-
Unsecured revolving credit facilities		35,500			-		-		-			35,500
Unsecured senior notes payable		657,913			-		-		-			657,913
Unamortized/unaccreted premium (discount) on notes payable		(316	)		37		5,504		-			5,225
Other liabilities		37,219			5,067		13,775		-			56,061
Total Liabilities		787,807			55,055		282,914		-			1,125,776
STOCKHOLDERS’ EQUITY		1,044,217			236,940		257,639		(628,309	)		901,487
Total Liabilities and Stockholders’ Equity	$	1,832,024		$	291,995	$	540,553	$	(628,309	)	$	2,036,263

29

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Condensed Statement of Operations for the three months ended March 31, 2009	Equity One Inc.			Combined Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
	(In thousands)
REVENUE:
Minimum rent	$	25,977		$	7,280		$	19,958		$	-		$	53,215
Expense recoveries		6,801			2,238			5,384			-			14,423
Percentage rent		426			101			613			-			1,140
Management and leasing services		156			394			-			-			550
Total revenue		33,360			10,013			25,955			-			69,328
EQUITY IN SUBSIDIARIES' EARNINGS		31,757			-			-			(31,757	)		-
COSTS AND EXPENSES:
Property operating		8,734			2,006			8,182			-			18,922
Rental property depreciation and amortization		6,294			1,570			7,427			-			15,291
General and administrative		10,121			818			1,317			-			12,256
Total costs and expenses		25,149			4,394			16,926			-			46,469
INCOME BEFORE OTHER INCOME AND EXPENSE AND DISCONTINUED OPERATIONS:		39,968			5,619			9,029			(31,757	)		22,859
OTHER INCOME AND EXPENSES:		-			-			-			-			-
Investment income		2,050			4			3			-			2,057
Equity in loss  in unconsolidated joint ventures		-			(7	)		-			-			(7	)
Other income (expense), net		1,050						-			-			1,050
Interest expense		(9,401	)		(864	)		(9,298	)		-			(19,563	)
Amortization of deferred financing fees		(392	)		(18	)		(34	)		-			(444	)
Gain on acquisition of DIM		-			-			26,866			-			26,866
Gain on extinguishment of debt		8,691			-			-			-			8,691
INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND DICONTINUED OPERATIONS:		41,966			4,734			26,566			(31,757	)		41,509
Income tax benefit of taxable REIT subsidiaries		-			(112	)		751						639
INCOME FROM CONTINUING OPERATIONS		41,966			4,622			27,317			(31,757	)		42,148
DISCONTINUED OPERATIONS:
Operations of income-producing properties sold or held for sale		19			1			11			-			31
Gain (loss) on disposal of income producing property		552			-			626			-			1,178
Income from discontinued operations		571			1			637			-			1,209
NET INCOME	$	42,537		$	4,623		$	27,954		$	(31,757	)	$	43,357

30

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Condensed Statement of Operations for the three months ended March 31, 2008	Equity One Inc.			Combined Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
	(In thousands)
REVENUE:
Minimum rent	$	25,582		$	8,737		$	13,656		$	-			47,975
Expense recoveries		6,505			2,696			4,463			-			13,664
Percentage rent		550			123			776			-			1,449
Management and leasing services		-			183			-			-			183
Total revenue		32,637			11,739			18,895			-			63,271
EQUITY IN SUBSIDIARIES' EARNINGS		16,888			-			-			(16,888	)		-
COSTS AND EXPENSES:
Property operating		7,852			1,985			6,230			-			16,067
Rental property depreciation and amortization		6,267			1,990			3,507			-			11,764
General and administrative		5,814			1,003			68			-			6,885
Total costs and expenses		19,933			4,978			9,805			-			34,716
INCOME BEFORE OTHER INCOME AND EXPENSE AND DISCONTINUED OPERATIONS:		29,592			6,761			9,090			(16,888	)		28,555
OTHER INCOME AND EXPENSES:		-			-			-			-
Investment income		264			2			5,896			-			6,162
Equity in income (loss)  in unconsolidated joint ventures		-			-			-			-			-
Other income (expense), net		42			-			-			-			42
Interest expense		(11,017	)		(1,424	)		(3,541	)		-			(15,982	)
Amortization of deferred financing fees		(383	)		(19	)		(27	)		-			(429	)
Gain on acquisition of DIM		-			-			-			-			-
Loss on sale of real estate		(42	)		-			-			-			(42	)
Gain on extinguishment of debt		2,380			-			-			-			2,380
INCOME FROM CONTINUING OPERATIONS BEFORE TAX AND DICONTINUED OPERATIONS:		20,836			5,320			11,418			(16,888	)		20,686
Income tax benefit of taxable REIT subsidiaries		-			83			-			-			83
INCOME FROM CONTINUING OPERATIONS		20,836			5,403			11,418			(16,888	)		20,769
DISCONTINUED OPERATIONS:
Operations of income-producing properties sold or held for sale		18			67			-						85
Gain (loss) on disposal of income producing property		-			-			-						-
(Loss) gain income from discontinued operations		18			67			-			-			85
NET INCOME	$	20,854		$	5,470		$	11,418		$	(16,888	)	$	20,854

31

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Condensed Statement of Cash Flows for the three months ended March 31, 2009	Equity One, Inc.			Combined Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated
	(In thousands)
Net cash (used in) provided by operating activities	$	(24,267	)	$	2,700		$	43,261		$	21,694
INVESTING ACTIVITIES:
Additions to and purchases of rental properties		(393	)		(938	)		(907	)		(2,238	)
Land held for development		-			-			-			-
Additions to construction in progress		(952	)		41			(2,499	)		(3,410	)
Proceeds from disposal of real estate and rental properties		755			-			889			1,644
Advances to joint ventures		15			-			-			15
Increase in deferred leasing costs		(595	)		(69	)		(308	)		(972	)
Proceeds from sale of securities		72,048			-			-			72,048
Purchase of securities		(10,719	)		-			-			(10,719	)
Advances to subsidiaries, net		(9,788	)		46,381			(36,593	)		-
Investment in consolidated subsidiary		(916	)		-			-			(916	)
Net cash provided by (used in)  investing activities		49,455			45,415			(39,418	)		55,452
FINANCING ACTIVITIES:
Repayments of mortgage notes payable		(625	)		(788	)		(2,573	)		(3,986	)
Borrowings under mortgage notes		-			-			-			-
Net repayments  borrowings under revolving credit facilities		-			(25,500	)		(1,270	)		(26,770	)
Repayment from senior debt		-			(21,827	)		-			(21,827	)
Repurchase of common stock		(5,425	)		-						(5,425	)
Stock issuance cost		(25	)		-			-			(25	)
Change in deferred financing costs		-			-			-
Cash dividends paid to stockholders		(23,142	)		-			-			(23,142	)
Distributions to minority interest		-			-			-			-
Net cash used in financing activities		(29,217	)		(48,115	)		(3,843	)		(81,175	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		(4,029	)		(0	)		0			(4,029	)
CASH ACQUIRED THROUGH ACQUISITION		1,857									1,857
CASH AND CASH EQUIVALENTS,  BEGINNING OF THE PERIOD		5,355									5,355
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	3,183		$	(0	)	$	0		$	3,183

32

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Condensed Statement of Cash Flows for the three months ended March 31, 2008	Equity One, Inc.			Combined Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidated
	(In thousands)
Net cash provided by operating activities	$	(10,443	)	$	28,087		$	8,200		$	25,844
INVESTING ACTIVITIES:
Additions to and purchases of rental properties		(205	)		(3,739	)		(759	)		(4,703	)
Land held for development		-			(82	)		-			(82	)
Additions to construction in progress		(72	)		(4,560	)		(270	)		(4,902	)
Proceeds  from disposal of real estate and rental properties		514			-			-			514
Decrease in cash held in escrow		46,226			-			-			46,226
Increase in deferred leasing costs		(383	)		(1,398	)		(441	)		(2,222	)
Proceeds from repayment of notes receivable		8			-			-			8
Proceeds from sale of securities		250			-			-			250
Purchases of securities		(51	)		-			-			(51	)
Advances (to) from affiliates		22,752			(17,101	)		(5,651	)		-
Net cash provided by (used in)  investing activities		69,039			(26,880	)		(7,121	)		35,038
FINANCING ACTIVITIES:
Repayments of mortgage notes payable		(456	)		(1,207	)		(1,079	)		(2,742	)
Net repayments borrowings under revolving credit facilities		(12,500	)		-			-			(12,500	)
Repayment of senior debt		(24,996	)		-			-			(24,996	)
Proceeds from issuance of common stock		234			-			-			234
Cash dividends paid to stockholders		(22,191	)		-			-			(22,191	)
Net cash used in financing activities		(59,909	)		(1,207	)		(1,079	)		(62,195	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		(1,313	)		-			-			(1,313	)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD		1,313			-			-			1,313
CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	-		$	-		$	-		$	-

33

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

12. Fair Value Measurements

In September 2006, the FASB issued Statement No.  157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishing a framework for measuring fair value, which includes a hierarchy based on the quality of inputs used to measure fair value and provides specific disclosure requirements based on the hierarchy.

Fair Value Hierarchy

FAS 157 requires the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. The various levels of the FAS 157 fair value hierarchy are described as follows:

· Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.

· Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.

· Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

FAS 157 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Recurring Fair Value Measurements

The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31, 2009:

	Fair Value Measurements
	(In thousands)
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Available-for-sale-securities	$	13,074	$	60,916
Interest rate swap		-		926
Total	$	13,074	$	61,842

34

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Valuation Methods

Interest rate swap – This financial instrument is valued under an income approach using industry-standard models that consider various assumptions, including time value, volatility factors, current market and contractual prices for the underlying derivative, and counterparty non-performance risk.  Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Debt securities – These securities are valued using industry-standard models that consider various assumptions, including time to maturity, applicable market volatility factors, and current market and selling prices for the underlying debt instruments which are traded on the open market, even if not highly liquid.  Substantially all of these assumptions are observable in the marketplace, or can be derived from observable data.

13. Commitments and Contingencies

As of March 31, 2009, we pledged letters of credit totaling $13.3 million as additional security for certain financial and other obligations.

We have committed to fund approximately $3.8 million, based on current plans and estimates, in order to complete pending development and redevelopment projects.  These obligations, comprising principally of construction contracts, are generally due as the work is performed and are expected to be financed by the funds available under our credit facilities, or cash on hand.

Certain of our properties are subject to ground leases, which are accounted for as operating leases and have annual obligations of approximately $88,000.  Additionally we have operating lease agreements for office space in which we have an annual obligation of approximately $398,000.

We are subject to litigation in the normal course of business.  However, we do not believe that any of the litigation outstanding as of March 31, 2009, will have a material adverse effect on our financial condition or results of operations.

As described in Note 7, in connection with the DIM Stock Exchange, we have obtained rights to acquire an additional 766,573 ordinary shares of DIM (or depository receipts related thereto) on or before January 1, 2011, subject to certain conditions precedent.  Pursuant to the DIM Exchange Agreement, at the closing of that acquisition, we will be required to issue either 536,601 shares of our common stock or pay cash in the amount of $11.50 per DIM share plus an additional cash amount based on dividends paid on shares of our common stock and DIM shares, if any, between the date of the DIM Exchange Agreement and the future closing.  See Note 7 for a more detailed description of the transaction, the stock exchange agreement and the future contingent consideration.

14.  Severance

On March 30, 2009, we announced that Greg Andrews, our former Chief Financial Officer, and Thomas McDonough, our former Chief Investment Officer, agreed to terminate their employment arrangements with us.

In the three months ended March 31, 2009, we recorded a one-time charge of $3.3 million related to the accelerated recognition of expenses due to the termination of these two executives’ employment. The following table outlines amounts which are based on the terms of the executives’ employment agreements.

35

EQUITY ONE, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2009

(Unaudited)

Three Month Ended
March 31, 2009
Severance Expense
Cash Severance Items:
Base Pay	$	1,325
Bonus		731
Total cash items	$	2,056
Non-cash Severance Items:
Restricted Stock Accelerated Vesting	$	919
Stock Option Accelerated Vesting		610
Long-term Incentive Plan Not Paid		(334	)
Total non-cash items	$	1,195
Total	$	3,251

15. Subsequent Events

On April 15, 2009, we repaid the remaining $171.6 million outstanding principal amount on our $200 million 3.875% unsecured senior notes.

In April of 2009, we repurchased approximately $6.5 million principal amount of our unsecured outstanding senior notes for consideration of $4.1 million, generating a gain of approximately $2.3 million.

In April 2009, we issued and sold 6,660,800 shares of our common stock in an underwritten public offering (including 160,800 shares pursuant to the underwriters’ over-allotment option). The shares were offered to the public at $14.30 per share. The issuance of the shares was registered under the Securities Act of 1933 pursuant to our shelf registration statement.Prior to the commencement of the public offering, we entered into a common stock purchase agreement with an affiliate of our largest stockholder, Gazit-Globe, Ltd., which may be deemed to be controlled by Chaim Katzman, the chairman of our board of directors.  Under the purchase agreement, Gazit’s affiliate purchased 2,450,000 shares of our common stock at the public offering price concurrently with the closing of the public offering. In connection with the purchase agreement, we also executed a registration rights agreement granting the buyer customary demand and “piggy-back” registration rights.  As a result of the public offering and the concurrent private placement, we received approximately $126.2 million net of underwriter’s discounts and expenses.

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the condensed consolidated interim financial statements and notes thereto appearing in Item 1 of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on February 25, 2008.

Unless the context otherwise requires, all references to “we”, “our”, “us”, and “Equity One” in this report refer collectively to Equity One, Inc. and its consolidated subsidiaries.

Critical Accounting Policies

Our 2008 Annual Report on Form 10-K contains a description of our critical accounting policies, including revenue recognition, cost capitalization, impairment of real estate assets, purchase accounting treatment for acquisitions, accounting for securities, impairment testing of goodwill, and joint venture accounting.  For the three months ended March 31, 2009, there were no material changes to these policies, with the exception to the following:

On January 1, 2009, the Company adopted the provisions of FASB Statement No. 141 (revised 2007), Business Combinations (“FAS 141R”) and is applying such provisions prospectively to business combinations that have an acquisition date on or after January 1, 2009. FAS 141R establishes principles and requirements for how an acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures goodwill acquired in a business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In addition, FAS 141R requires that changes in the amount of acquired tax attributes be included in the Company’s results of operations. While FAS 141R applies only to business combinations with an acquisition date after its effective date, the amendments to FASB Statement No. 109, Accounting for Income Taxes (“FAS 109”), with respect to deferred tax valuation allowances and liabilities for income tax uncertainties have been applied to all deferred tax valuation allowances and liabilities for income tax uncertainties recognized in prior business combinations. On January 9, 2009, the Company entered into a Stock Exchange Agreement with an unrelated party under which it acquired on January 14, 2009  1,237,676 shares of DIM Vastgoed N.V., or DIM’s ordinary voting shares in exchange for 866,373 shares of the Company’s common stock. Also on January 9, 2009, we entered into a voting rights agreement with the same unrelated party covering an additional 766,573 ordinary voting shares. During January 2009, we also purchased an additional 105,461 shares of DIM stock on the open market. As of January 31, 2009, EQY owned 65.2 % of DIM’s outstanding ordinary shares and had voting control over another 9.4 % resulting in voting control of over 74.6% of DIM’s outstanding ordinary shares.  As such management determined it had effectively gained control of DIM and as such applied the provisions of FAS 141R in conjunction with this acquisition.  Refer to Note 7 of the Notes to the Condensed Consolidated Financial Statements for detailed disclosure on the consideration provided, the net assets acquired, and the bargain purchase gain recorded.  

On January 1, 2009, the Company adopted the provisions of FAS 160. The provisions of FAS 160 establish accounting and reporting standards for the noncontrolling interest in a consolidated subsidiary. FAS 160 is being applied prospectively, except for the provisions related to the presentation of noncontrolling interests in the statement of shareholders’ equity. As of March 31, 2009 and December 31, 2008, noncontrolling interests of $989,000 and $989,000, respectively, have been classified as a component of equity in the consolidated balance sheet. For the three months ended March 31, 2009 and 2008, net loss attributable to noncontrolling interests of $476,000 and $0, respectively, is included in net income. Earnings per share has not been affected as a result of the adoption of the provisions of FAS 160.

In June 2008, the FASB issued FSP EITF No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities which clarifies that unvested share-based payment awards that entitle their holders to receive non-forfeitable dividends, such as our restricted stock awards, are considered participating securities.  As participating securities, these instruments will be included in the calculation of basic EPS.  Because the awards are considered participating securities under Statement of Financial Standards FAS No. 128, Earnings per Share, the issuing entity is required to apply the two-class method of computing basic and diluted earnings per share.    The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common shareholders.  Under the two-class method, earnings for the period are allocated between common shareholders and other security holders, based on their respective rights to receive dividends.  The FSP requires retrospective application for periods prior to the effective date and as a result, all prior period earnings per share data presented herein have been adjusted to conform to these provisions.  The adoption of FSP EITF 03-6-1 did not result in a change to the previously reported basic EPS and diluted EPS for the three months ended March 31, 2008.

37

Changes in Basis of Presentation

As discussed more fully in Note 1 to the accompanying consolidated financial statements, certain 2008 financial information has been reclassified so that the basis of presentation is consistent with that of the 2009 financial information. This reclassification includes (i) the adoption of Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“Statement”) No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51 (“FAS 160”), and (ii) the adoption of FASB Staff Position (“FSP”) Emerging Issues Task Force (“EITF”) Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP No. EITF 03-6-1”).

Executive Overview

We are a real estate investment trust (“REIT”) that owns, manages, acquires, develops and redevelops neighborhood and community shopping centers.  Our primary objective is to maximize stockholder value by generating sustainable cash flow growth and increasing the value of our real estate assets.  To achieve our objective, we lease and manage our shopping centers primarily with experienced, in-house personnel.  We acquire neighborhood or community shopping centers that either have leading anchor tenants or contain a mix of tenants that reflect the shopping needs of the communities they serve.  We also develop and redevelop shopping centers on a tenant-driven basis, leveraging either existing tenant relationships or geographic and demographic knowledge while seeking to minimize risks associated with land development. 

We acquired a controlling interest in DIM Vastgoed N.V. in the first quarter of 2009. DIM is a public company, the shares of which are listed on the NYSE Euronext Amsterdam stock exchange. We acquired our controlling stake by means of a stock exchange with another DIM shareholder which resulted in us acquiring voting control over 74.6% of DIM’s outstanding ordinary shares. Prior to this acquisition, we accounted for our 48% interest in DIM on December 31, 2008 as an available-for-sale security.  As part of this acquisition, we acquired net assets of $114.2 million, with a noncontrolling interest of $25.8 million, at a bargain gain of $26.9 million. We are still in the process of finalizing valuations of certain assets and liabilities, thus these provisional measurements are subject to change. The results of DIM’s operations have been included in our financial statements from the acquisition date and for the first quarter of 2009.  The pro forma consolidated statement of operations has not been presented because it is impracticable to prepare such information.  Please refer to Note 7 in the accompanying unaudited condensed consolidated Financial Statements for a complete description of the transaction and for additional detail on the accounting of this transaction in accordance with FASB Statement No. 141 (revised 2007), Business Combinations (“FAS 141R”).

As of March 31, 2009, our consolidated property portfolio comprised 181 properties, including 167 shopping centers consisting of approximately 19.0 million square feet of gross leasable area (“GLA”), four development/redevelopment properties, six non-retail properties, and four parcels held for development. Included in our portfolio for the three months ended March 31, 2009 are 21 shopping centers consisting of approximately 2.6 million square feet of GLA owned by DIM. As of March 31, 2009, our core portfolio, which does not include DIM, was 91.5% leased and included national, regional and local tenants. In addition, we currently own a 10% interest in GRI-EQY I, LLC (“GRI Venture”), which owns ten neighborhood shopping centers totaling approximately 1.4 million square feet of GLA as of March 31, 2009.  The GRI joint venture properties were 94.7% leased at March 31, 2009.

Additionally, we own a 20% interest in G&I VI Investment South Florida Portfolio, LLC (“DRA Venture”) which owns one office building and two neighborhood shopping centers totaling approximately 503,000 square feet of GLA as of March 31, 2009.  In total, the DRA Venture’s properties were 65% leased at March 31, 2009. 

During 2009, our business has continued to feel the effects of the challenging economic environment and the turmoil in the U.S credit and retail markets.  Buyers and sellers of real estate assets have faced a market that has made completing transactions more difficult as a result substantial declines in the available capital from the credit market. A consumer-led economic slowdown has had a meaningful impact on most retailers, causing many companies, both national and local, to cease or curtail operations or declare bankruptcy.  We have seen these economic conditions broadly across all of our markets.

These macro-trends have made it more difficult for us to achieve our objectives of growing our business through internal rent increases, re-cycling capital from lower-tier assets into higher quality properties, and growing our asset management business.  As an example, reductions in occupancy have adversely impacted our rental revenue and expense recoveries, thereby negatively affecting our year over year operating results.

38

Notwithstanding the difficult operating environment, the execution of our business strategy during the first quarter of 2009 resulted in:

· the execution of 30 new leases in our core portfolio totaling 100,068 square feet, the renewal of 79 leases totaling 188,453 square feet and the extension of 7 leases totaling 10,242 square feet;  

· we have acquired a 9.6% interest in Ramco-Gershenson Properties Trust with a cost basis of approximately $9 million.

· the repurchase of $30.5 million of our outstanding senior notes at a gain of $8.7 million; and

· utilizing other options to grow our business through  transactions such as the acquisition of a controlling interest in DIM on January 14, 2009.

· the sale of two ground lease outparcels for an aggregate gross sales price of $1.7 million which generated an aggregate gain of approximately $1.2 million.

Results of Operations

We derive substantially all of our revenues from rents received from tenants under existing leases on each of our properties.  These revenues include fixed base rents, recoveries of expenses that we have incurred and that we pass through to the individual tenants and percentage rents that are based on specified percentages of tenants’ revenues, in each case as provided in the particular leases.

Our primary cash expenses consist of our property operating expenses, which include real estate taxes, repairs and maintenance, management expenses, insurance, utilities and other expenses, general and administrative expenses, which include payroll, office expenses, professional fees and other administrative expenses, and interest expense, primarily on mortgage debt, unsecured senior debt and revolving credit facilities.  In addition, we incur substantial non-cash charges for depreciation and amortization on our properties.  We also capitalize certain expenses, such as taxes and interest related to properties under development or redevelopment until the property is ready for its intended use.

Our consolidated results of operations often are not comparable from period to period due to the impact of property acquisitions, dispositions, developments and redevelopments.  The results of operations of any acquired property are included in our financial statements as of the date of its acquisition. A large portion of the change in our statement of operations line items is related to these changes in our property portfolio. In particular, our 2009 results reflect the impact of consolidating DIM’s operations with our own.

39

The following summarizes certain line items from our unaudited condensed consolidated statements of operations which we think are important in understanding our operations and/or those items which have significantly changed in the three months ended March 31, 2009 as compared to the same period in 2008:

	Three Months Ended
	March 31,
	2009		2008		% Change
	(In thousands)
Total revenue	$	69,328	$	63,271		9.6	%
Property operating expenses		18,922		16,067		17.8	%
Rental property depreciation and amortization		15,291		11,764		30.0	%
General and administrative expenses		12,256		6,885		78.0	%
Investment income		2,057		6,162		-66.6	%
Equity in real estate joint ventures		7		-		N/A
Other income (expense), net		1,050		42		2404.2	%
Interest expense		19,563		15,982		22.4	%
Loss on sale of real estate		-		42		-100.0	%
Amortization of deferred financing fees		444		429		3.6	%
Gain on acquisition of controlling interest in subsidiary		26,866		-		N/A
Gain on extinguishment of debt		8,691		2,380		265.2	%
Income tax benefit of taxable REIT subsidiaries		639		83		666.5	%
Income from discontinued operations		1,209		85		1320.2	%
Net loss attributable to Noncontrolling interest		476		-		N/A
Net Income	$	43,357	$	20,854		107.9	%

Comparison of the three months ended March 31, 2009 to 2008

Included in the following discussion of results of operations are the results of DIM which has been consolidated in our results of operations for the three months ended March 31, 2009 commencing on the acquisition date of January 14, 2009 but not for the 2008 period.  For additional details on the consolidation of DIM and the effect on our financial reporting, see the Notes to the Condensed Consolidated Financial Statements included in this report.

Total revenue increased by $6.0 million, or 9.6%, to $69.3 million in 2009.  The increase is primarily attributable to the following:

· an increase of approximately $10.3 million attributable to the DIM properties;

· an increase of approximately $670,000 associated with management, leasing and asset management services provided to our joint ventures;

· an increase of approximately $490,000 related to the completion of various development/redevelopment projects;

· a decrease of approximately $4.8 million attributable to the sale of our nine income producing properties to our GRI joint venture, revenue which was included in our first quarter 2008 results; and

· a decrease of approximately $550,000 in same-property revenue due primarily to lower percentage rent income and lower small shop occupancy which also has the effect of lowering rental, expense recoveries.

Property operating expenses increased by $2.9 million, or 17.8%, to $18.9 million in 2009.  The increase primarily consists of the following:

· an increase of approximately $2.6 million attributable to the DIM properties;

· an increase of approximately $1.3 million in property operating costs, higher real estate tax expense, insurance expense, bad debt expense, and general repair and maintenance costs associated with vacant rental units, partially offset by lower common area maintenance expense;

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· an increase of approximately $170,000 related to the completion of various development/redevelopment properties and projects currently under construction;

· an increase of $40,000 in property operating costs associated with our non-retail properties; and

· a decrease of approximately $1.2 million associated with the sale of our nine income producing properties to our GRI joint venture.

Rental property depreciation and amortization increased by $3.5 million, or 30.0%, to $15.3 million for 2009 from $11.8 million in 2008.  The increase in 2009 was primarily related to the following:

· an increase of approximately $4.5 million related to the DIM properties; and

· a decrease of approximately $1.0 million attributable to the sale of our nine income producing properties to the GRI joint venture included fully in the 2008 results, but not included in the 2009 results.

General and administrative expenses increased by $5.4 million, or 78%, to $12.3 million in 2009 compared to $6.9 million in 2008. The increase is attributable to $3.3 million associated with severance and severance related costs related to the termination of employment of two senior executives initiated as part of our management streamlining and cost management program.  We also incurred an increase in leasing personnel cost and higher audit fee expense associated with finalizing the 2008 audit which were not present in the same 2008 three month period.  In addition, we had the following direct and indirect costs associated with DIM;  approximately $450,000 in administrative costs associated with DIM’s ongoing operations, which comprises legal, accounting services and other costs, and approximately $800,000 in transaction costs, such as legal  accounting and other professional services associated with our acquisition of the controlling interest in DIM.

Investment income decreased by $4.1 million, or 67%, to $2.1 million in 2009 compared to $6.2 million 2008.  The decrease is primarily attributable to a $5.4 million reduction in dividend income due to the absence of $5.9 million in DIM dividends in the current period, partially offset by $500,000 of dividend income recognized on our current equity investments. We also recognized in the 2009 period $1.3 million of interest income from our investment in debt securities that were not present in the comparable 2008 period.

Equity in loss in unconsolidated joint ventures was $7,000 for 2009 which represents our pro rata share of our joint ventures operating results. There was no activity for the 2008 period because the GRI joint venture did not commence operations until the second quarter of 2008 and the DRA joint venture acquired its first property in the third quarter of 2008.

Other income increased by approximately $1.0 million in the 2009 period compared to the 2008 period.  The increase primarily resulted from approximately $800,000 in income related to insurance proceeds received for tornado damage on a property in South Carolina.

Interest expense increased by $3.6 million, or 22.4%, to $19.6 million in the 2009 period as compared to $16.0 million in the 2008 period.  The increase is primarily attributable to the following:

· an increase of approximately $900,000 associated with the amortization of the fair market value of mortgage debt pertaining to DIM’s properties which was not present in the 2008 period;

· an increase of approximately $4.0 million of interest expenses related to the mortgages on DIM’s properties which were not present in the 2008 period;

· an increase of $1.1 million associated with a secured mortgage loan we added in the third quarter of 2008;

· an increase of approximately $500,000 associated with lower capitalized interest due to fewer development projects  in process;

· a decrease of approximately $1.6 million related to the repayment of certain mortgages and senior notes;

· a decrease of $1.2 million in mortgage interest related to our nine income producing properties that we sold to the GRI joint venture, which are included fully in the 2008 results, but not included in the 2009 results;

The bargain purchase gain of $26.9 million recorded in the 2009 period resulted from our acquisition of a controlling interest in DIM. The total gain consists of $39.0 million representing the net value of DIM assets acquired in excess of our cost basis after recognizing a $12.1 million revaluation loss of our previously recorded cost investments in DIM.

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In the first quarter of 2009, we repurchased and canceled approximately $30.5 million principal amount of our senior notes and recognized a net gain on early extinguishment of debt of approximately $8.7 million.  In the 2008 period, we repurchased and canceled approximately $27.9 million of our senior debt and recognized a net gain on early extinguishment of debt of approximately $2.4 million.

In the first quarter of 2009, we recognized $639,000 in net tax benefits mainly attributable to the consolidation of DIM , which accounts for $750,000 in tax benefits in the current period, net of $110,000 in tax provisions from our core portfolio. In the same 2008 three month period, we recognized a tax provision of $83,000.

In the first quarter of 2009, we recognized a net gain of $1.2 million from discontinued operations mainly due to the sale of two ground lease outparcels at two of our properties.

In the first quarter of 2009, net losses of $476,000 were attributable to the noncontrolling interest in DIM. No comparable amounts are included in the 2008 period.

As a result of the foregoing, we had net income of $43.4 million in the first quarter ended 2009, compared to net income of $20.8 million in the first quarter of 2008.

Funds From Operations

We believe Funds from Operations (“FFO”) (combined with the primary GAAP presentations) is a useful supplemental measure of our operating performance that is a recognized metric used extensively by the real estate industry and, in particular, REITs.  The National Association of Real Estate Investment Trusts (“NAREIT”) stated in its April 2002 White Paper on Funds from Operations,  “Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminish predictably over time.  Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves”.

FFO, as defined by NAREIT, is “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable real property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures”.  It states further that “adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis”.  We believe that financial analysts, investors and stockholders are better served by the presentation of comparable period operating results generated from our FFO measure.  Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

FFO is presented to assist investors in analyzing our operating performance.  FFO (i) does not represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs, including the ability to make distributions, (iii) is not an alternative to cash flow as a measure of liquidity, and (iv) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating our operating performance.

The following table illustrates the calculation of FFO for the three months ended March 31, 2009 and 2008:

	Three Months Ended
	March 31,
	2009		2008
	(In thousands)
Net income attributed to Equtiy One	$	43,833	$	20,854
Adjustments:
Rental property depreciation and amortization, including discontinued operations, net of noncontolling intrerest		13,744		11,796
Pro rata share of real estate depreciation from unconsolidated JV		361		-
Funds from operations	$	57,938	$	32,650

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The following table reflects the reconciliation of FFO per diluted share to earnings per diluted share, the most directly comparable GAAP measure, for the periods presented:

	Three Month Ended
	March 31,
	2009		2008
Earnings per diluted share atributbale to Equity One	$	0.56	$	0.28
Adjustments:
Rental property depreciation and amortization, including discontinued operations, net of noncontrolling intrerest		0.18		0.16
Pro rata share of real estate depreciation from unconsolidated JV		-		-
Net adjustment for unvested shares and non-controlling interest*		0.01		-
Funds from operations per diluted share	$	0.75	$	0.44
*Includes net effect of (a) an adjustment for unvested awards of share-based payments with rights to receive dividends or dividend equivalents and (b) an adjustment related to the possible share issuance in the fourth quarter of 2010 pursuant to the DIM exchange agreement, refer to footnote 6 for details on EPS.

Liquidity and Capital Resources

Due to the nature of our business, we typically generate significant amounts of cash from operations. However, the cash generated from operations is primarily paid to our stockholders in the form of dividends.  Our status as a REIT requires that we distribute 90% of our REIT taxable income (including net capital gain) each year, as defined in the Code.  Our short-term liquidity requirements consist primarily of normal recurring operating expenses, regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities), recurring company expenditures, such as general and administrative expenses, non-recurring company expenditures (such as tenant improvements and redevelopments) and dividends to common stockholders.  Historically, we have satisfied these requirements principally through cash generated from operations.

Our long-term capital requirements consist primarily of maturities under our long-term debt, development and redevelopment costs and the costs related to growing our business, including acquisitions.

Historically, we have funded these requirements through a combination of sources which were available to us, including additional and replacement secured and unsecured borrowings, proceeds from the issuance of additional debt or equity securities, capital from institutional partners that desire to form joint venture relationships with us and proceeds from property dispositions.  So far in 2009, however, as a result of extenuating conditions in the credit and capital markets, many of these sources of capital have become increasingly more expensive or more difficult to obtain or may be temporarily unavailable.

In response to these volatile conditions, the following activity occurred subsequent to March 31, 2009 end and will be included in our second quarter results,

In April 2009, we issued and sold 6,660,800 shares of our Common Stock in an underwritten public offering (including 160,800 shares pursuant to the underwriters’ over-allotment option). The shares were offered to the public at $14.30 per share. The issuance of the shares was registered under the Securities Act of 1933 pursuant to our shelf registration statement.

Prior to the commencement of the public offering, we entered into a common stock purchase agreement with an affiliate of our largest stockholder, Gazit-Globe, Ltd., which may be deemed to be controlled by Chaim Katzman, the Chairman of our board of directors.  Under the purchase agreement and concurrently with the closing of the public offering, Gazit’s affiliate purchased 2,450,000 shares of our common stock at the public offering price. In connection with the purchase agreement, we also executed a registration rights agreement granting the buyer customary demand and “piggy-back” registration rights.

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As a result of the public offering and the concurrent private placement, we raised $126.2 million net of underwriter’s discounts and expenses. In addition, in order to take advantage of the public bond markets, during the three ended March 31, 2009, we repurchased approximately $30.5 million of our outstanding unsecured senior notes with varying maturities and generated a gain on the early extinguishment of debt of $8.7 million for the three months ended March 31, 2009.

We repurchased and cancelled approximately $6.5 million principal amount of our outstanding unsecured senior notes for consideration of $4.1 million, generating a gain of approximately $2.3 million that will be recorded in the second quarter.

In addition, the equity issuance and debt repurchases have dramatically impacted our balance sheet by reducing our overall leverage. We repaid the $171.6 million principal amount left outstanding on our $200 million 3.875% unsecured senior notes.  The $100 million variable interest rate swap contract related to this debt matured concurrently with these notes and we collected approximately $869,000 upon its settlement.

We anticipate higher than normal general and administrative expense starting in 2009 attributable to our acquisition of DIM and the related costs to ultimately consolidate the property management, accounting, and leasing operations.  Additionally we will incur costs related to legal and advisory fees as part of our investment in Ramco-Gershenson. We have nominated two independent candidates to serve as Class III trustees on the Ramco-Gershenson Properties Trust board of trustees.

As of March 31, 2009 we had approximately $60.9 million of short-term corporate debt securities that we expect to use for the repayment of certain near-term debt including approximately a $52.0 million balloon payment due in September 2009 related to one of the DIM properties.  We have two revolving credit facilities with aggregate potential borrowing limits up to $242.0 million, which we can utilize initially to finance the acquisition of properties and meet other short-term working capital requirements.  As of March 31, 2009 we had $218.7 million available to be drawn under those credit facilities. 

Summary Cash Flows. As of March 31, 2009, we had approximately $3.2 million of available cash and cash equivalents on hand.  In addition, we had investments in shorter-term debt securities of approximately $60.9 million, and holdings of common and preferred stocks of $13.1 million. During the first quarter of 2009, $71.6 million of our debt security holding matured or were sold, the proceeds of which were used to fund our common stock investments in Ramco-Gershenson and other REIT. In addition, as of March 31, 2009, we had approximately $218.7 million available to borrow under our unsecured revolving credit facilities, subject to the covenants of those facilities. 

The following summary discussion of our cash flows is based on the condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below:

	Three Months Ended
	March 31,
	2009			2008			Increase (Decrease)
	(In thousands)
Net cash provided by operating activities	$	21,694		$	25,873		$	(4,179	)
Net cash provided by investing activities	$	55,452		$	35,038		$	20,414
Net cash used in financing activities	$	(81,175	)	$	(62,223	)	$	(18,952	)

Our principal source of operating cash flow is cash generated from our rental properties.  Our properties provide a relatively consistent stream of rental income that provides us with resources to fund operating expenses, general and administrative expenses, debt service, and quarterly dividends.  Net cash provided by operating activities totaled approximately $21.7 million for the three months ended March 31, 2009 compared to approximately $25.9 million in the 2008 period. 

Net cash provided by investing activities was approximately $55.5 million for the three months ended March 31, 2009 compared with approximately $35.0 million used in investing activities during the three months ended March 31, 2008.

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Investing activities during the current period consisted primarily of the proceeds from debt security maturities and sales, net of investments in various other REIT common stocks and additions to investment in rental property, land and construction.  In the prior year period, cash flow provided from investing activities was primarily related to the release of cash held in escrow, offset by additions to investment in rental property, land and construction.

Net cash used in financing activities totaled approximately $81.2 million for the three months ended March 31, 2009 compared with approximately $62.2 million provided by financing activities for the same period in 2008. Cash used in financing activities was attributable to repayments of $26.8 million in lines of credit, the payment of $23.1 million in dividends, the early extinguishment of $30.5 million in senior debt, and the repurchase of 462,000 shares of our common stock.  In the prior year, cash used was mainly attributed to $25.0 million in repayment of senior debt, $22.2 million in dividend payments, and $12.5 million in repayments on lines of credit.

Future Contractual Obligations.  The following table sets forth certain information regarding future contractual obligations, excluding interest, as of March 31, 2009:

	Payments due by period
Contractual Obligations	Total		Less than 1 year (2)		1-3 years		3-5 years		More than 5 years
	(In thousands)
Mortgage notes payable:
Scheduled amortization	$	110,306	$	11,116	$	25,855	$	32,370	$	40,965
Balloon payments	$	518,982		52,027		140,646		123,555		202,754
Total mortgage obligations	$	629,288	$	63,143	$	166,501	$	155,925	$	243,719
Well Fargo		10,000		-		10,000		-		-
Unsecured senior notes (1)		626,505		171,630		-		10,000		444,875
Operating leases		856		362		384		104		6
Construction commitments		3,869		3,869		-		-		-
Total contractual obligations	$	1,270,518	$	239,004	$	176,885	$	166,029	$	688,600

(1) $100 million of the outstanding balance has been swapped to a floating interest rate based on the six-month LIBOR in arrears, plus 0.4375%.  The contractual obligations for the unsecured senior notes do not reflect this interest rate swap. The swap was settled in April 2009 in connection with the repayment of our senior notes.

(2) Amount represents balance of obligation for the remainder of the 2009 year.

Our debt level could subject us to various risks, including the risk that our cash flow will be insufficient to meet required payments of principal and interest, and the risk that the resulting reduction in financial flexibility could inhibit our ability to develop or improve our rental properties, withstand downturns in our rental income, or take advantage of business opportunities.  In addition, because we currently anticipate that only a portion of the principal of our indebtedness will be repaid prior to maturity, it is expected that it will be necessary to refinance the majority of our debt.  Accordingly, there is a risk that such indebtedness will not be able to be refinanced or that the terms of any refinancing will not be as favorable as the terms of our current indebtedness.

On March 24, 2004, we swapped $100.0 million notional principal of the $200.0 million, 3.875% senior notes to a floating interest rate based on the 6-month LIBOR in arrears plus 0.4375%. Subsequent to quarter end, we repaid the $171.6 million 3.875% senior notes and settled the related interest rate swap. The weighted average interest rate of the unsecured senior notes at March 31, 2009 and December 31, 2008 was 5.62% and 5.66%, respectively, excluding the effects of the interest rate swap and net premium adjustment.

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Off-Balance Sheet Arrangements

Letters of Credit:  As of March 31, 2009, we have pledged letters of credit for $13.3 million as additional security for certain property matters.  Substantially all of our letters of credit are issued under our revolving credit facilities.

Construction Commitments:  As of March 31, 2009, we have entered into construction commitments and have outstanding obligations to fund $3.8 million, based on current plans and estimates, in order to complete current development and redevelopment projects.  These obligations, comprising principally construction contracts, are generally due as the work is performed and are expected to be financed by funds available under our credit facilities.

Operating Lease Obligations:  Certain of our properties are subject to ground leases, which are accounted for as operating leases and have annual obligations of approximately $88,000.  Additionally, we have operating lease agreements for office space for which we have an annual obligation of approximately $398,000.

Non-Recourse Debt Guarantees:  Under the terms of certain non-recourse mortgage loans, we could, under specific circumstances, be responsible for portions of the mortgage indebtedness in connection with certain customary non-recourse carve-out provisions, such as environmental conditions, misuse of funds, and material misrepresentations.  In management’s judgment, it would be unlikely for us to incur any material liability under these guarantees that will have a material adverse effect on our financial condition, results of operations, or cash flow.

Equity

As part of a change in accounting principle due to our adoption of FAS 160, we reclassified  to equity $989,000 related to the noncontrolling portion of our Walden Woods down REIT partnership that was previously stated in the mezzanine section between liabilities and equity. We also included a new caption in our statement of stockholders’ equity to present the total amount of noncontrolling interest represented in our equity.

In connection with our consolidation of DIM, we recognized approximately $25.8 million of noncontrolling interest in our equity representing the percentage of market capitalization of DIM that we did not own at the date that our controlling interest was established. Subsequent changes to the noncontrolling interest will arise from allocation of DIM’s income or loss or upon changes in our ownership of DIM.

In the three months ended March 31, 2009, we repurchased and retired 461,694 shares of our Common Stock at an average price of $11.75.

Future Capital Requirements

We believe, based on currently proposed plans and assumptions relating to our operations, that our existing financial arrangements, together with cash generated from our operations, cash on hand and our shorter-term investments will be sufficient to satisfy our cash requirements for a period of at least twelve months. In the event that our plans change, our assumptions change or prove to be inaccurate or cash flows from operations or amounts available under existing financing arrangements prove to be insufficient to fund our debt maturities, expansion and development efforts or to the extent we discover suitable acquisition targets the purchase price of which exceeds our existing liquidity, we would be required to seek additional sources of financing. Additional financing may not be available on acceptable terms or at all, and any future equity financing could be dilutive to existing stockholders. If adequate funds are not available, our business operations could be materially adversely affected. See Part I –Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2007, filed with the SEC on February 25, 2009.

Distributions

We believe that we qualify and intend to qualify as a REIT under the Internal Revenue Code. As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to stockholders.  As distributions have exceeded taxable income, no provision for federal income taxes has been made. While we intend to continue to pay dividends to our stockholders, we also will reserve such amounts of cash flow as we consider necessary for the proper maintenance and improvement of our real estate and other corporate purposes, while still maintaining our qualification as a REIT.

Inflation

Many of our leases contain provisions designed to partially mitigate the adverse impact of inflation. Such provisions include clauses enabling us to receive percentage rents based on tenant gross sales above predetermined levels, rents that generally increase as prices rise, or escalation clauses which feature fixed rent escalation amounts or are related to increases in the Consumer Price Index or similar inflation indices.

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 Most of our leases require the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.

Our financial results are affected by general economic conditions in the markets in which our properties are located. An economic recession or other adverse changes in general or local economic conditions could result in the inability of some existing tenants to meet their lease obligations and could otherwise adversely affect our ability to attract or retain tenants. Our properties are typically anchored by supermarkets, drug stores and other consumer necessity and service retailers which typically offer day-to-day necessities rather than luxury items. These types of tenants, in our experience, generally maintain consistent sales performance during periods of adverse economic conditions.

Cautionary Statement Relating to Forward Looking Statements

Certain matters discussed in this Quarterly Report on Form 10-Q contain “forward-looking statements” for purposes of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements are based on current expectations and are not guarantees of future performance.

All statements other than statements of historical facts are forward-looking statements, and can be identified by the use of forward-looking terminology such as “may,” “will,” “might,” “would,” “expect,” “anticipate,” “estimate,” “would,” “could,” “should,” “believe,” “intend,” “project,” “forecast,” “target,” “plan,” or “continue” or the negative of these words or other variations or comparable terminology, are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected.  Because these statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements.  We caution you not to place undue reliance on those statements, which speak only as of the date of this report.

Among the factors that could cause actual results to differ materially are:

· general economic conditions, including the current recession, competition and the supply of and demand for shopping center properties in our markets;

· risks that tenants will not remain in occupancy or pay rent, or pay reduced rent due to declines in their businesses;

· interest rate levels and the availability of financing;

· potential environmental liability and other risks associated with the ownership, development and acquisition of shopping center properties;

· greater than anticipated construction or operating costs;

· inflationary, deflationary and other general economic trends;

· the effects of hurricanes and other natural disasters;

· any strategic transaction with, acquisition or combination, of our company with Ramco-Gershenson Properties Trust, or RPT, a publicly-traded REIT that owns community shopping centers in the midwestern, southeastern and mid-atlantic regions of the United States, in which we recently made an investment of approximately $9 million or approximately 9.6% of RPT’s common shares;

· the effects of the consolidation for financial reporting purposes of the financial results and position of DIM;

· management’s ability to successfully combine and integrate the properties and operations of separate companies that we have acquired in the past or may acquire in the future;

· impairment charges; and

· other risks detailed from time to time in the reports filed by us with the Securities and Exchange Commission.

Except for ongoing obligations to disclose material information as required by the federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

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ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Interest Rate Risk

The primary market risk to which we have exposure is interest rate risk. Changes in interest rates can affect our net income and cash flows. As changes in market conditions occur and interest rates increase or decrease, interest expense on the variable component of our debt will move in the same direction.  We intend to utilize variable rate indebtedness available under our unsecured revolving credit facilities in order to initially fund future acquisitions, development costs and other operating needs.  With respect to our fixed rate mortgage notes and senior unsecured notes, changes in interest rates generally do not affect our interest expense as these notes are at fixed rates for extended terms. Because we have the intent to hold our existing fixed-rate debt either to maturity or until the sale of the associated property, these fixed-rate notes pose an interest rate risk to our results of operations and our working capital position only upon the refinancing of that indebtedness. Our possible risk is from increases in long-term interest rates that may occur as this may increase our cost of refinancing maturing fixed-rate debt.  In addition, we may incur prepayment penalties or defeasance costs when prepaying or defeating fixed-rate debt.

If interest rates on our variable rate debt increase by 1%, the increase in annual interest expense on our variable rate debt would decrease future earnings and cash flows by approximately $1.1 million.  If interest rates on our variable rate debt decrease by 1%, the decrease in interest expense on our variable rate debt would increase future earnings and cash flows by approximately $1.1 million. This assumes that the amount outstanding under our variable rate debt, which is comprised of fixed rate debt converted to floating rate debt through the use of hedging agreements, remains at approximately $110.0 million, the balance as of March 31, 2009.

As of March 31, 2009, we had approximately $110.0 million of outstanding floating rate debt, $100.0 million of which consists of fixed rate borrowings that we have converted to floating rate borrowings through the use of hedging agreements.  We do not believe that the interest rate risk represented by our floating rate debt is material as of March 31, 2009, in relation to our $1.0 billion of outstanding debt, $2.1 billion of total assets and $2.6 billion total equity market capitalization as of that date.

The fair value of our fixed rate debt is $987.9 million, which includes the mortgage notes and fixed-rate portion of the senior unsecured notes payable (excluding the unamortized premium and the $100.9 million of fixed-rate debt converted to floating-rate debt through maturity).  If interest rates increase by 1%, the fair value of our total fixed-rate debt would decrease by approximately $38.7 million.  If interest rates decrease by 1%, the fair value of our total outstanding debt would increase by approximately $41.3 million.  This assumes that our total outstanding fixed-rate debt remains at $987.9 million, the balance as of March 31, 2009.

The floating rate hedge was settled at April 15, 2009 concurrently with the maturity of the related fixed borrowing.

Hedging Activities

To manage, or hedge, the exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments. We do not enter into derivative instruments for speculative purposes. We require that the hedges or derivative financial instruments be effective in managing the interest rate risk exposure that they are designated to hedge. This effectiveness is essential to qualify for hedge accounting. Hedges that meet these hedging criteria are formally designated as such at the inception of the contract. When the terms of an underlying transaction are modified, or when the underlying hedged item ceases to exist, resulting in some ineffectiveness, the change in the fair value of the derivative instrument will be included in earnings. Additionally, any derivative instrument used for risk management that becomes ineffective is marked-to-market each period and would be charged to operations.

We are exposed to credit risk, in the event of non-performance by the counter-parties to the hedge agreements.  We believe that we mitigate our credit risk by entering into these agreements with major financial institutions.  Net interest differentials to be paid or received under a swap contract and/or collar agreement are included in interest expense as incurred or earned.

During 2004, we entered into a $100.0 million notional principal variable rate interest swap with an estimated fair value of $925,000 as of March 31, 2009. This swap converted fixed-rate debt to variable rate based on the six-month LIBOR in arrears plus 0.4375%, and matured April 15, 2009 concurrently with our 3.875% unsecured notes.

The estimated fair value of our derivative financial instruments has been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we could realize in a current market exchange. The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value.

Other Market Risks

As of March 31, 2009, we had no material exposure to any other market risks (including foreign currency exchange risk, commodity price risk or equity price risk).

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ITEM 4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Securities and Exchange Act of 1934, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. As permitted, our management’s assessment of and conclusion on the effectiveness of our internal control over financial reporting did not include the internal controls of DIM Vastgoed, Inc., because it was acquired by us in a purchase business combination during the first quarter of fiscal year 2009. DIM constituted approximately 18% of our consolidated total assets at March 31, 2009 and 15% of consolidated revenues for the quarter ended March 31, 2009.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2009, we acquired a controlling interest in DIM and consolidated its result in our financial statements. We note that we have not yet been able to evaluate the internal controls over financial reporting of DIM in a way that would allow us to determine if the consolidation of DIM would materially affect, or be reasonably likely to materially affect, our internal controls over financial reporting. Other than the foregoing description of our consolidation of DIM, there have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2009, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

Neither our properties, nor we, are subject to any material litigation. Our properties and we may be subject to routine litigation and administrative proceedings arising in the ordinary course of business which collectively is not expected to have a material adverse affect on the business, financial condition, and results of operations or our cash flows.

ITEM 1A.   RISK FACTORS

Our Annual Report on Form 10-K for the year ended December 31, 2008, Part I –Item 1A, Risk Factors, describes important risk factors that could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-Q or presented elsewhere by management from time to time.  The following is an additional risk factor:

Several of our controlling stockholders have pledged their shares of our stock as collateral under bank loans, foreclosure and disposition of which could have a negative impact on our stock price.

As of May 8, 2009, Chaim Katzman, the chairman of our board of directors and his affiliates beneficially own approximately 52.5% of the outstanding shares of our common stock. Several of our stockholders affiliated with Mr. Katzman, including Gazit-Globe, Ltd. and related entities, have pledged a substantial portion of our stock that they own to secure loans made to them by commercial banks.  Based on information from these stockholders, we believe that 90.2% of the shares reported as beneficially owned by Mr. Katzman and his affiliates are pledged to secure loans made to these stockholders.

If one of these stockholder defaults on any of its obligations under these pledge agreements or the related loan documents, these banks may have the right to sell the pledged shares in one or more public or private sales that could cause our stock price to decline.  Many of the occurrences that could result in a foreclosure of the pledged shares are out of our control and are unrelated to our operations.  Some of the occurrences that may constitute such an event of default include:

· the stockholder’s failure to make a payment of principal or interest when due;

· a reduction in the dividend we pay on our common stock;

· the occurrence of another default that would entitle any of the stockholder’s other creditors to accelerate payment of any debts and obligations owed to them by the stockholder;

· if the bank, in its absolute discretion, deems that a change has occurred in the condition of the stockholder to which the bank has not given its prior written consent; and

· if, in the opinion of the bank, the value of the pledged shares has been reduced or is likely to be reduced (for example, the price of our common stock declines).

In addition, because so many shares are pledged to secure these loans, the occurrence of an event of default could result in a sale of pledged shares that would trigger a change of control of our company, even when such a change may not be in the best interests of our stockholders or may violate covenants of certain loan agreements.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.  OTHER INFORMATION

None.

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ITEM 6.   EXHIBITS

(a) Exhibits:

10.1 Amended and restated employment contract between Mark Langer and the Company dated April 24, 2009.

31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.

32.0 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

Date: May 11, 2009	EQUITY ONE, INC.
	/s/ Mark Langer
	Mark Langer
	Executive Vice President and Chief Financial Officer
	(Principal Accounting and Financial Officer)

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INDEX TO EXHIBITS

Exhibits Description

10.1	Amended and restated employment contract between Mark Langer and the Company dated April 24, 2009.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.

32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002.

EX-10.1

EXHIBIT 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (“Agreement”) is made effective as of April 24, 2009 (“Effective Date”) by and between Equity One, Inc, a Maryland corporation (the “Company”), and MARK LANGER (“Executive”)and amends, restates and supersedes in its entirety that certain Employment Agreement, dated as of January 2, 2008 between the Company and the Executive.

W I T N E S S E T H:

The Company desires to continue to employ Executive as of the Effective Date, on the terms and conditions set forth in this Agreement, and Executive desires to continue to be so employed.

IN CONSIDERATION of the premises and the mutual covenants set forth below, the parties hereby agree as follows:

Section 1.         Employment.  The Company hereby agrees to employ Executive and Executive hereby agrees to such employment, on the terms and conditions hereinafter set forth.

Section 2.         Term.  The period of employment of Executive by the Company hereunder  shall commence on the Effective Date and shall continue through the earlier of (x) December 31, 2011 (the “Expiration Date”) and (y) the termination of such employment in accordance with Section 6 hereof (such period, as it may be extended pursuant to the next sentence of this Section 2 being referred to as the “Employment Period”).  Unless otherwise terminated, this Agreement and the Employment Period automatically shall be renewed for successive one-year periods, each expiring on the  anniversary of the Expiration Date next succeeding the commencement of such one year period, unless either party gives the other party written notice (such notice, a “Non-Renewal Notice”) at least six months before the then scheduled expiration of the Employment Period of that party’s intent to allow the Employment Period and this Agreement to expire.  Any Notice of Non-Renewal shall be given in accordance with Section 15 hereof.  This Agreement shall terminate upon the expiration or termination of Executive’s employment (including, without limitation, any termination pursuant to Section 6 hereof), except for those provisions that survive any such termination of this Agreement pursuant to Section 17 hereof.

Section 3.         Position and Duties. From the Effective Date and thereafter during the Employment Period, Executive shall serve as Executive Vice President, Chief Financial Officer and Chief Administrative Officer of the Company and shall report solely and directly to the Chief Executive Officer of the Company.  Executive shall have those powers and duties normally associated with such position(s) and such other powers and duties as the Chief Executive Officer may properly prescribe, provided that such other powers and duties are consistent with Executive’s position(s).  Executive shall devote his full business time, attention and energies to Company affairs as are necessary to fully perform his duties for the Company (other than absences due to illness or vacation).

Section 4.         Place of Performance.  The principal place of employment of Executive shall be at the Company’s corporate offices in North Miami Beach, Florida.

Section 5.         Compensation and Related Matters.

(a)       Salary.  During the Employment Period, the Company shall pay Executive an annual base salary of not less than $400,000 (“Base Salary”).  Executive’s Base Salary shall be paid in approximately equal installments in accordance with the Company’s customary payroll practices.  If the Company increases Executive’s Base Salary, such increased Base Salary shall then constitute the Base Salary for all purposes of this Agreement.  The Company may not decrease Executive’s Base Salary during the Employment Period.

(b)       Annual Bonus.  Following each December 31 that occurs during the Employment Period, the compensation committee (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”) shall review with the Chief Executive Officer the Executive’s performance at least annually during each calendar year of the Employment Period and cause the Company to award Executive such cash bonus (“Bonus”) as the Compensation Committee shall reasonably determine as fairly compensating and rewarding Executive for services rendered to the Company and/or as an incentive for continued service to the Company with a target Bonus (“Target Bonus”) amount equal to sixty-five percent (65%) of the then Base Salary.  The amount of Executive’s Bonus shall be determined in the discretion of the Compensation Committee in consultation with the Chief Executive Officer and shall depend on, among other things, the Company’s achievement of certain performance levels established by the Compensation Committee; provided, however, that in no event shall the amount of Executive’s Bonus be less than $150,000.  The Company shall pay any Bonus to Executive on or before March 15th of the calendar year following the calendar year to which the Bonus relates.

(c)           Restricted Stock and Stock Options.

(i)         On the Effective Date, the Company shall grant to Executive under the equity compensation plans of the Company 50,000 shares of the Company’s restricted stock.  Subject to Section 8 hereof, half of such shares of restricted stock shall vest on the second anniversary of the Effective Date and the remaining shares shall vest on the fourth anniversary of the Effective Date.  Dividends on restricted stock shall be paid to Executive at such times as dividends are paid to shareholders of the Company’s common stock.

(ii)        On the Effective Date, the Company shall grant to Executive under the equity compensation plans of the Company options to purchase 100,000 shares of the Company’s common stock.  Subject to Section 8 hereof, half of such options shall vest on the second anniversary of the Effective Date and the remaining options shall vest on the fourth anniversary of the Effective Date.

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(iii)       Following each December 31 that occurs during the Employment Period, the Compensation Committee shall review with the Chief Executive Officer the Executive’s performance and cause the Company to grant to Executive stock options and/or shares of restricted stock in the amount that the Compensation Committee shall reasonably determine as fairly compensating and rewarding Executive for services rendered to the Company and as an incentive for continued service to the Company; provided, however, that in no event shall the number and terms of such award be less favorable than granting to the Executive options to purchase 100,000 shares of the Company common stock.  In addition, if the Employment Period is extended without termination pursuant to Section 2, then following each December 31 that occurs during the Employment Period beginning with December 31, 2013, the Executive shall receive, in addition to the options described above, at least 12,500 shares of restricted stock. Subject to Section 8 hereof, stock options and shares of restricted stock so granted or issued shall vest in equal installments on each of the first, second, third and fourth anniversaries of the date of grant thereof.

(iv)       Any stock options granted to the Executive in accordance with this Agreement shall have an exercise price equal to the closing price of a share of the Company’s common stock on the principal stock exchange on which the Company’s common stock is listed and traded and traded on the date of grant thereof.  In addition, Executive shall have the right to exercise all vested options within the six (6) month period immediately following Executive’s termination of employment, provided, however, that in the event Executive voluntarily terminates Executive’s employment (for other than Good Reason), or the Company terminates Executive’s employment for Cause, Executive shall only have ninety (90) days following termination of employment to exercise Executive’s options.

(v)        In the event that the Company issues to the Executive a Notice of Non-Renewal, all unvested restricted stock and options (granted hereunder or otherwise) shall vest as of the last day of the Employment Period provided that the Executive does not earlier terminate his employment or is not earlier terminated by the Company for Cause.  The grant of options and/or restricted stock to Executive shall be evidenced by a separate written agreement(s) to be provided to Executive. In the event of any conflict between the terms of such stock option or restricted stock agreement or the plan relating thereto and the terms of this Agreement, the terms of this Agreement shall control.

(d)       Expenses.  The Company shall reimburse Executive for all reasonable expenses incurred by him in the discharge of his duties hereunder, including travel expenses, upon the presentation of reasonably itemized statements of such expenses in accordance with the Company’s policies and procedures now in force or as such policies and procedures may be modified with respect to all senior executive officers of the Company.

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(e)       Vacation; Illness.  Executive shall be entitled to the number of weeks of vacation per year provided to the Company’s senior executive officers, but in no event less than three (3) weeks annually.  Executive shall be entitled to take up to 30 days of sick leave per year; provided, however, that any prolonged illness resulting in absenteeism greater than the sick leave permitted herein or disability shall not constitute “Cause” for termination under the terms of this Agreement.

(f)        Welfare, Pension and Incentive Benefit Plans.  During the Employment Period, Executive (and his wife and dependents to the extent provided therein) shall be entitled to participate in and be covered under all the welfare benefit plans or programs maintained by the Company from time to time on terms no less favorable than provided for any of its senior executives including, without limitation, all medical, hospitalization, dental, disability, accidental death and dismemberment and travel accident insurance plans and programs.  In addition, during the Employment Period, Executive shall be eligible to participate in and be covered under all pension, retirement, savings and other employee benefit, perquisite, change in control and executive compensation plans and any annual incentive or long-term performance plans and programs maintained from time to time by the Company on terms no less favorable than provided for any of its senior executives.

(g)       Automobile. During the Employment Period, the Company shall provide Executive with an automobile allowance equal to $1,000.00 per month.

Section 6.         Termination.  Executive’s employment hereunder may be terminated during the Employment Period under the following circumstances:

(a)       Death.  Executive’s employment hereunder shall terminate upon his death.

(b)       Disability.  If, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been substantially unable to perform his duties hereunder for an entire period in excess of one hundred twenty (120) days in any 12-month period despite any reasonable accommodation available from the Company, the Company shall have the right to terminate Executive’s employment hereunder for “Disability”, and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement.

(c)       Without Cause.  The Company shall have the right to terminate Executive’s employment for any reason or for no reason, which termination shall be deemed to be without Cause, and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement.

(d)       Cause.  The Company shall have the right to terminate Executive’s employment for Cause, and such termination in and of itself shall not be, nor shall it be deemed to be, a breach of this Agreement.  For purposes of this Agreement, the Company shall have “Cause” to terminate Executive’s employment upon Executive’s:

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(i)         Breach of any material provisions of this Agreement;

(ii)        Conviction of a felony, capital crime or any crime involving moral turpitude, including but not limited to crimes involving illegal drugs; or

(iii)       Willful misconduct that is materially economically injurious to the Company or to any Company Affiliate.

For purposes of this Section 6(d), no act, or failure to act, by Executive shall be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company or Company Affiliate; provided, however, that the willful requirement outlined in paragraph (iii) above shall be deemed to have occurred if Executive’s action or non-action continues for more than ten (10) days after Executive has received written notice of the inappropriate action or non-action.  Failure to achieve performance goals, in and of itself, shall not be grounds for a termination for Cause.  For purposes of this Agreement, “Company Affiliate” means any entity in control of, controlled by or under common control with the Company or in which the Company owns any common or preferred stock or interest or any entity in control of, controlled by or under common control with such entity thereof.

Cause shall not exist under paragraph (i) or (iii) above unless and until the Company has delivered to Executive written notice of its determination that Executive was guilty of the conduct set forth in paragraph (i) or (iii) and specifying the particulars thereof in detail.  However, in the case of conduct described in paragraph (i), Cause will not be considered to exist unless Executive is given 30 days from the date of such notice to cure such breach, or if the breach cannot be reasonably cured within such 30 day period, to commence to cure such breach, to the satisfaction of the Company, within such 30 day period.  If Executive has not cured such breach to the satisfaction of the Company within 90 days after the date of such notice, the Company shall give a Notice of Termination to Executive.  In the event a final determination is made by a court of competent jurisdiction that the Company’s termination of Executive under this Section 6(d) does not meet the definition of Cause, Executive will be deemed to have been terminated by the Company without Cause.

(e)       Following Change in Control.  Within twelve (12) months after a Change in Control occurs, Executive may resign his employment or his employment may be terminated for any reason, including, without limitation, death or Disability.  For purposes of this Agreement, such a termination of employment (including, without limitation, as a result of such a resignation) is referred to as “Termination Following Change in Control.”  For this purpose, a “Change in Control” means:

(i)            Consummation by the Company of (A) a reorganization, merger, consolidation or other form of corporate transaction or series of transactions, in each case, other than a reorganization, merger or consolidation or other transaction that would result in the holders of the voting securities of the Company outstanding immediately prior thereto holding securities that represent immediately after such transaction more than 50% of the combined voting power of the voting securities of the Company or the surviving company or the parent of the surviving company, or (B) a liquidation or dissolution of the Company or (C) the sale of all or substantially all of the assets of the Company; or

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(ii)            Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided (A) that any person becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) or (B) any individual appointed to the Board by the Incumbent Board shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board; or

(iii)           The acquisition (other than from the Company) by any person, entity or “group,” within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, of more than 26% of either the then outstanding shares of the Company’s common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors (hereinafter referred to as the ownership of a “Controlling Interest”) excluding, for this purpose, any acquisitions by (A) the Company or its subsidiaries, or (B) any person, entity or “group” that as of the Effective Date beneficially owns (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934) a Controlling Interest of the Company or any affiliate of such person, entity or “group.”

Executive acknowledges and agrees that, notwithstanding anything in this Agreement to the contrary, a Change in Control shall not be deemed to have occurred for purposes of this Agreement if, after the consummation of any of the events described in the definition of a Change in Control, Chaim Katzman remains Chairman of the Board of the Successor Employer (as hereinafter defined) and if Gazit, Inc. and its affiliates own in the aggregate 33% or more of the outstanding voting securities of the Successor Employer.  For purposes of this Agreement, the term “Successor Employer” shall mean the Company, the reorganized, merged or consolidated Company (or the successor thereto), or the acquiror (through merger or otherwise) of all or substantially all of the assets of the Company, as the case may be.

(f)        Resignation Other Than Termination Following Change in Control.  Executive shall have the right to resign his employment by providing the Company with a Notice of Termination, as provided in Section 7.  If such resignation occurs other than within twelve (12) months after a Change in Control occurs, Executive’s resulting termination of employment shall be considered as other than Termination Following Change in Control.  Any termination pursuant to this paragraph shall not in and of itself be, nor shall it be deemed to be, a breach of this Agreement.

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(g)       Resignation For Good Reason.  Executive shall have the right to resign his employment for Good Reason.  For purposes of this Agreement, Executive shall have Good Reason to terminate Executive’ employment upon:

(i)         the material breach by the Company of any of its agreements set forth herein and the failure of the Company to correct such breach within thirty (30) days after the receipt by the Company of written notice from Executive specifying in reasonable detail the nature of such breach (the parties hereby acknowledge that a change in the principal place of employment under Section 4 hereof to a location other than in Miami-Dade, Broward or Palm Beach County, Florida, without the consent of Executive, shall constitute a material breach hereof); or

(ii)        any substantial or material diminution of Executive’s responsibilities including without limitation reporting responsibilities and/or title.

Section 7.         Termination Procedure.

(a)        Notice of Termination.  Any termination of Executive’s employment by the Company or by Executive (whether by resignation or otherwise) pursuant to Section 6 of this Agreement, except termination due to Executive’s death pursuant to Section 6(a), shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 15.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice that states the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so stated.

(b)       Date of Termination.  The effective date of any termination pursuant to Section 6 of Executive’s employment by the Company or by Executive (whether by resignation or otherwise) (the “Date of Termination”) shall be (i) if Executive’s employment is terminated by his death, the date of his death, and (ii) if Executive’s employment is terminated for any other reason by the Company or by Executive (whether by resignation or otherwise), the date on which a Notice of Termination is given or any later date (within thirty (30) days after the giving of such notice) set forth in such Notice of Termination.

Section 8.         Compensation Upon Termination or During Disability.  If Executive experiences a Disability or his employment terminates during the Employment Period, the Company shall provide Executive with the payments and benefits set forth below; provided, however, as a specific condition to being entitled to any payments or benefits under this Section 8, Executive must have resigned as a director, trustee and officer of the Company and all of its subsidiaries and as a member of any committee of the board of directors of the Company and its subsidiaries of which he is a member and must have joined the Company in having executed a mutual release of both the Company and its Affiliates as well as Executive, in the form attached hereto as Exhibit A.  Executive acknowledges and agrees that the payments set forth in this Section 8 constitute liquidated damages for termination of his employment during the Employment Period, which the parties hereto have agreed to as being reasonable, and Executive acknowledges and agrees that he shall have no other remedies in connection with or as a result of any such termination.

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(a)        Disability; Death.  During any period that Executive fails to perform his duties hereunder as a result of Disability, Executive shall continue to receive his full Base Salary set forth in Section 5(a) and his full Bonus as set forth in Section 5(b) until his employment is terminated pursuant to Section 6(b).  In addition, if Executive’s employment is terminated for Disability pursuant to Section 6(b), or due to Executive’s death pursuant to Section 6(a), in each case other than a Termination Following Change in Control:

(i)             the Company shall pay to Executive or his estate, as the case may be, a lump sum payment as soon as practicable following the Date of Termination equal to (A) his Base Salary, Accrued Bonus (as defined in Section 8(d) below) and accrued vacation pay through the Date of Termination, plus (B) one of the following two amounts, as applicable, (1) if there is one year or more remaining in the Employment Period, the sum of Executive’s then current Base Salary for one year plus his Average Bonus (as defined in Section 8(d) below), or (2) if there is less than one year remaining in the Employment Period, the amount of Base Salary (as provided for in Section 5(a)) Employee would have received through the end of the Employment Period plus his Average Bonus pro rated for the portion of the fiscal year following the date of termination through the end of the Employment Period;

(ii)            stock options and restricted stock granted to Executive prior to the Date of Termination that were to vest based on the passage of time shall fully vest as of the Date of Termination;

(iii)           the Company shall reimburse Executive, or his estate, as the case may be, pursuant to Section 5(d) for reasonable expenses incurred, but not paid prior to such termination of employment; and

(iv)           Executive or his estate or named beneficiaries shall be entitled to any other rights, compensation and/or benefits as may be due to Executive or his estate or named beneficiaries in accordance with the terms and provisions of any agreements, plans or programs of the Company.

(b)       Termination By Company Without Cause, Termination by Executive for Good Reason or Termination Following Change in Control.  If Executive’s employment is terminated by the Company without Cause, Executive terminates his employment with the Company for Good Reason, or if Executive resigns or is terminated by reason of death or Disability and such resignation or termination as a result of death or Disability is a Termination Following Change in Control:

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(i)             the Company shall pay to Executive his Base Salary, Accrued Bonus and accrued vacation pay through the Date of Termination, as soon as practicable following the Date of Termination;

(ii)            the Company shall pay to Executive as soon as practicable following the Date of Termination a lump-sum payment equal to two (2) times the sum of Executive’s then current Base Salary plus his Average Bonus;

(iii)            in the case of termination by the Company without Cause or termination by Executive for Good Reason, stock options and restricted stock granted to Executive prior to the Date of Termination that were to vest based on the passage of time shall fully vest as of the Date of Termination;

(iv)           in the case of Executive’s resignation or his termination by reason of death or Disability and such resignation or termination as a result of death or Disability is a Termination Following Change in Control (A) stock options and restricted stock granted to Executive prior to the Date of Termination that were to vest based on the passage of time shall fully vest as of the Date of Termination; and (B) if Executive’s Date of Termination precedes the otherwise applicable end-date for a performance period for stock options or restricted stock granted to Executive pursuant to Section 5(c), or granted to Executive under any equity-based award program sponsored by the Company, a percentage of such stock options or restricted stock shall vest as of the Date of Termination equal to the period of time that has elapsed since the date of award of such stock options or restricted stock compared to the total time during the performance period stated in the award of such stock options or restricted stock;

(v)           the Company shall reimburse Executive pursuant to Section 5(d) for reasonable expenses incurred, but not paid prior to such termination of employment; and

(vi)           Executive shall be entitled to any other rights, compensation and/or benefits as may be due to Executive in accordance with the terms and provisions of any agreements, plans or programs of the Company.

(c)        Termination by the Company for Cause or Resignation By Executive Other Than Termination For Good Reason and other than  Termination Following Change in Control.  If Executive’s employment is terminated by the Company for Cause, or if Executive’s resignation is other than for Good Reason or other than a Termination Following Change in Control:

(i)            the Company shall pay Executive his Base Salary and, to the extent required by law or the Company’s vacation policy, his accrued vacation pay through the Date of Termination, as soon as practicable following the Date of Termination;

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(ii)            the Company shall reimburse Executive pursuant to Section 5(d) for reasonable expenses incurred, but not paid prior to such termination of employment, unless such termination resulted from a misappropriation of Company funds;

(iii)           Executive shall be entitled to any other rights, compensation and/or benefits as may be due to Executive in accordance with the terms and provisions of any agreements, plans or programs of the Company; and

(iv)           All unvested stock options and unvested restricted stock granted to Executive shall be forfeited.

(d)        Accrued Bonus.  If termination of Executive’s employment occurs as of or after the end of any calendar year for which a Bonus would be payable to Executive pursuant to Section 5(b) hereof, such termination is not for Cause and such termination occurs prior to the date that bonuses for senior executives are paid for such calendar year (including, without limitation, the Bonus), then Executive (or his estate, as the case may be) shall be entitled to payment of any Bonus that is earned for such calendar year without regard to whether such termination of employment precedes the Bonus payment date.  If termination of Executive’s employment occurs prior to the end of any calendar year for which a Bonus would be payable to Executive pursuant to Section 5(b), such termination is not for Cause or a voluntary termination by Executive (other than for Good Reason or a Termination Following a Change of Control), then Executive (or his estate, as the case may be) shall be entitled to payment of a pro rated portion of the Bonus calculated as follows:  Executive’s Average Bonus shall be multiplied by a fraction the numerator of which shall be the number of days in such calendar year that elapsed prior to such termination of employment and the denominator of which shall be 365.  The amount that Executive is entitled to under either of the two preceding sentences shall be referred to in this Agreement as the “Accrued Bonus”.  For purposes of this Agreement, the “Average Bonus” shall mean the average annual Bonus, calculated by dividing (x) the aggregate amount of the Bonuses received by Executive for each of three (3) most recent full calendar years that elapsed during the Employment Period or such lesser number of full calendar years if three full calendar years shall not have so elapsed, and dividing such total by the number of such full calendar years.

(e)           Tax Payment by the Company.

(i)            If any amount or benefit paid or distributed to Executive pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Executive by the Company or any affiliated company (collectively, the “Covered Payments”), are or become subject to the tax (the “Excise Tax”) imposed under Section 4999 of the Code, or any similar tax that may hereafter be imposed, the Company shall pay to Executive at the time specified below an additional amount (the “Tax Reimbursement Payment”) such that the net amount retained by Executive with respect to such Covered Payments, after deduction of any Excise Tax on the Covered Payments and any Federal, state and local income or employment tax and Excise Tax on the Tax Reimbursement Payment provided for by this Section 8(e), but before deduction for any Federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments.

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(ii)            For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax:  (A) such Covered Payments will be treated as “parachute payments” within the meaning of Section 280G of the Code, and all “parachute payments” in excess of the “base amount” (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company’s independent certified public accountants appointed prior to the date of the Change in Control or tax counsel selected by such accountants (the “Accountants”), the Company has a reasonable basis to conclude that such Covered Payments (in whole or in part) either do not constitute “parachute payments” or represent reasonable compensation for personal services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the allocable “base amount,” or such “parachute payments” are otherwise not subject to such Excise Tax, and (B) the value of any non-cash benefits or any deferred payment or benefit shall be determined by the Accountants in accordance with the principles of Section 280G of the Code.

(iii)           For purposes of determining the amount of the Tax Reimbursement Payment, Executive shall be deemed to pay:  (A) Federal income, social security, Medicare and other employment taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made, and (B) any applicable state and local income or other employment taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal income taxes that could be obtained by Executive from the deduction of such state or local taxes if paid in such year.

(iv)           The Tax Reimbursement Payment (or portion thereof) provided for above shall be paid to Executive not later than 10 business days following the payment of the Covered Payments.

(v)            If the Excise Tax is subsequently determined by the Accountants or pursuant to any proceeding or negotiations with the Internal Revenue Service to be less than the amount taken into account hereunder in calculating the Tax Reimbursement Payment made, Executive shall repay to the Company, at the time of such determination, the portion of the prior Tax Reimbursement Payment that would not have been paid if the reduced Excise Tax had been taken into account in initially calculating the Tax Reimbursement Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(b) of the Code.  Notwithstanding the foregoing, if any portion of the Tax Reimbursement Payment to be refunded to the Company has been paid to any Federal, state or local tax authority, repayment thereof shall not be required until actual refund or credit of such portion has been made to Executive, and interest payable to the Company shall not exceed interest received or credited to Executive by such tax authority for the period it held such portion.  Executive and the Company shall mutually agree upon the course of action to be pursued (and the method of allocating the expenses thereof) if Executive’s good faith claim for refund or credit is denied.

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(vi)           If the Excise Tax is later determined by the Accountants or pursuant to any proceeding or negotiations with the Internal Revenue Service to exceed the amount taken into account hereunder at the time the Tax Reimbursement Payment is made (including, but not limited to, by reason of any payment the existence or amount of which cannot be determined at the time of the Tax Reimbursement Payment), the Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus any interest or penalty payable with respect to such excess) at the time that the amount of such excess is finally determined.

(f)         Tax Compliance Delay in Payment.  If the Company reasonably determines that any payment or benefit due under this Section 8, or any other amount that may become due to Executive after termination of employment, is subject to Section 409A of the Internal Revenue Code of 1986 (“Code”), as amended, and that Executive is a “specified employee,” as defined in Code Section 409A, upon termination of Executive’s employment for any reason other than death (whether by resignation or otherwise), no amount may be paid to Executive earlier than six months after the date of termination of Executive’s employment if such payment would violate the provisions of Code Section 409A and the regulations issued thereunder, and payment shall be made, or commence to be made, as the case may be, on the date that is six months and one day after the termination of Executive’s employment, together with interest at the rate of five percent (5%) per annum beginning with the date one day after the termination of Executive’s employment until the date of payment.

Section 9.         Repayment By Executive.Executive acknowledges and agrees that the bonuses and other incentive-based or equity-based compensation received by him from the Company, and any profits realized from the sale of securities of the Company, are subject to the forfeiture requirements set forth in the Sarbanes-Oxley Act of 2002 and other applicable laws, rules and regulations, under the circumstances set forth therein.  If any such forfeiture is required pursuant to the Sarbanes-Oxley Act of 2002 or other applicable law, rule or regulation, within thirty (30) days after notice thereof from the Company, Executive shall pay to the Company the amount required to be forfeited.

Section 10.       Confidential Information; Ownership of Documents and Other Property.

(a)        Confidential Information.  Without the prior written consent of the Company, except as may be required by law, Executive will not, at any time, either during or after his employment by the Company, directly or indirectly divulge or disclose to any person, entity, firm or association, including, without limitation, any future employer, or use for his own or others benefit or gain, any financial information, prospects, customers, tenants, suppliers, clients, sources of leads, methods of doing business, intellectual property, plans, products, data, results of tests or any other trade secrets or confidential materials or like information of the Company, including (but not by way of limitation) any and all information and instructions, technical or otherwise, prepared or issued for the use of the Company (collectively, the “Confidential Information”), it being the intent of the Company, with which intent Executive hereby agrees, to restrict him from disseminating or using any like information that is not readily available to the general public.

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(b)       Information is Property of Company.  All books, records, accounts, tenant, customer, client and other lists, tenant, customer and client street and e-mail addresses and information (whether in written form or stored in any computer medium) relating in any manner to the business, operations, or prospects of the Company, whether prepared by Executive or otherwise coming into Executive’s possession, shall be the exclusive property of the Company and shall be returned immediately to the Company upon the expiration or termination of Executive’s employment or at the Company’s request at any time.  Upon the expiration or termination of his employment, Executive will immediately deliver to the Company all lists, books, records, schedules, data, and other information (including all copies) of every kind relating to or connected with the Company and its activities, business, and customers.

Section 11.       Restrictive Covenant; Notice of Activities.

(a)        Restricted Activities.  During the Employment Period and for a period of one (1) year after the expiration or termination of Executive’s employment, whether by resignation or otherwise, (except if Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, or if Executive’s termination of employment constitutes a Termination Following Change in Control or results due to non-renewal of this Agreement), Executive shall not, without the prior written consent of the Company, directly or indirectly, (i) enter into the employment of, render any services to, invest in, lend money to, engage, manage, operate, own, or otherwise offer other assistance to or participate in, as an officer, director, manager, employee, principal, proprietor, representative, stockholder, member, partner, associate, consultant or otherwise, any person or entity that competes, plans to compete or is considering competing with the Company in any business of the Company existing or proposed at the time Executive shall cease to perform services hereunder (a “Competing Entity”) in any state in which the Company conducts material operations (defined as accounting for 10% or more of the Company’s revenue), or owns assets the value of which totals 10% or more of the total value of the Company’s assets, at any time during the term of this Agreement (collectively, the “Territory”); (ii) interfere with or disrupt or diminish or attempt to disrupt or diminish, or take any action that could reasonably be expected to disrupt or diminish, any past or present or prospective relationship, contractual or otherwise, between the Company and any tenant, customer, supplier, sales representative, consultant or employee of the Company; (iii) directly or indirectly solicit for employment or attempt to employ, or assist any other person or entity in employing or soliciting for employment, either on a full-time or part-time or consulting basis, any employee (whether salaried or otherwise, union or non-union) of the Company who within one year of the time Executive ceased to perform services hereunder had been employed by the Company, or (iv) communicate with, solicit, accept business or enter into any business relationship with any person or entity who was a tenant or customer of the Company or any present or future tenant or customer of the Company (including without limitation tenants or customers previously or in the future generated or produced by Executive), in any manner that interferes with or disrupts or diminishes or might interfere with or might disrupt or diminish such tenant’s or customer’s relationship with the Company, or in an effort to obtain such tenant or customer as a tenant or customer of any person in the Territory.  Notwithstanding the foregoing, Executive shall be permitted to own up to a five percent equity interest in a publicly traded Competing Entity.

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(b)        Notice and Procedure.  Executive shall inform in writing any person or entity that seeks to employ or engage him in any capacity, of his noncompetition obligations under this Agreement, prior to accepting such employment or engagement.  Executive shall also inform the Company in writing of such prospective employment or engagement prior to accepting such employment or engagement.  If the Company or the Executive has any concerns that any of Executive’s proposed or actual post-employment activities may be restricted by, or otherwise in violation of, this Section 11, such party shall notify the other party of such concerns and, prior to the Company commencing any action to enforce its rights under this Section 11 or Executive seeking a declaratory judgment with respect to his obligations under this Section 11, the Company and Executive shall meet and confer to discuss the prospective employment or engagement, and shall provide the other party with an opportunity to explain why such prospective employment or engagement either does or does not violate this Section 11; provided, however, that Company’s obligations to give notice under this clause and to meet with Executive before commencing any action shall not apply if Executive has not provided notice before engaging in activities that Company reasonably believes violate this Section 11.  Any such meeting shall occur within three business days of notice and may be held in person or by telephonic, video conferencing or similar electronic means.

Section 12.        Violations of Covenants.

(a)        Injunctive Relief.  Executive agrees and acknowledges that (i) the services to be rendered by him hereunder are of a special and original character that gives them unique value, (ii) that the provisions of Sections 10 and 11, are, in view of the nature of the business of the Company, reasonable and necessary to protect the legitimate interests of the Company, (iii) that his violation of any of the covenants or agreements contained in this Agreement would cause irreparable injury to the Company, (iv) that the remedy at law for any violation or threatened violation thereof would be inadequate, and (v) that the Company shall be entitled to temporary and permanent injunctive or other equitable relief as it may deem appropriate without the accounting of all earnings, profits, and other benefits arising from any such violation, which rights shall be cumulative and in addition to any other rights or remedies available to the Company.  Executive hereby agrees that in the event of any such violation, the Company shall be entitled to commence an action, suit or proceeding in any court of appropriate jurisdiction for any such preliminary and permanent injunctive relief and other equitable relief.

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(b)       Enforcement.  The Company and Executive recognize that the laws and public policies of the various states of the United States and the District of Columbia may differ as to the validity and enforceability of certain of the provisions contained herein.  Accordingly, if any provision of this Agreement shall be deemed to be invalid or unenforceable, as may be determined by a court of competent jurisdiction, this Agreement shall be deemed to delete or modify, as necessary, the offending provision and to alter the balance of this Agreement in order to render the same valid and enforceable to the fullest extent permissible as aforesaid.

Section 13.       “Key Man” Insurance.At the request of the Company, Executive agrees to facilitate the Company to purchase and maintain “Key Man Insurance” in an amount desired by the Company for the benefit of the Company and to reasonably cooperate with the Company and its designated insurance agent to facilitate the purchase and maintenance of such insurance.

Section 14.        Successors; Binding Agreement.

(a)        Company’s Successors.  No rights or obligations of the Company under this Agreement may be assigned or transferred except that the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean the Company as herein before defined and any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company that executes and delivers the agreement contemplated by this Section 14 or that otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

(b)        Executive’s Successors.  No rights or obligations of Executive under this Agreement may be assigned or transferred other than his rights to payments or benefits hereunder, which may be transferred only by will or the laws of descent and distribution.  Upon Executive’s death, this Agreement and all rights of Executive hereunder shall inure to the benefit of and be enforceable by Executive’s beneficiary or beneficiaries, personal or legal representatives, or estate, to the extent any such person succeeds to Executive’s interests under this Agreement.  Executive shall be entitled to select and change a beneficiary or beneficiaries to receive any benefit or compensation payable hereunder following Executive’s death by giving the Company written notice thereof.  In the event of Executive’s death or a judicial determination of his incompetence, references in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or other legal representative(s).  If Executive should die following his Date of Termination while any amounts would still be payable to him hereunder if he had continued to live, all such amounts unless otherwise provided herein shall be paid in accordance with the terms of this Agreement to such person or persons so appointed in writing by Executive, or otherwise to his legal representatives or estate.

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Section 15.        Notice.  All notices or other communications that are required or permitted hereunder shall be in writing and sufficient if delivered personally, or sent by nationally-recognized, overnight courier or by registered or certified mail, return receipt requested and postage prepaid, addressed as follows:

To the Employer:	Equity One, Inc. 1600 NE Miami Gardens Drive North Miami Beach, Florida 33179 Attention: General Counsel
To Executive:	Mark Langer Equity One, Inc. 1600 NE Miami Gardens Drive North Miami Beach, Florida 33179

or to such other address as any party may have furnished to the others in writing in accordance herewith.  All such notices and other communications shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery, (b) in the case of delivery by nationally-recognized, overnight courier, on the business day following dispatch and (c) in the case of mailing, on the third business day following such mailing.

Section 16.        Attorneys’ Fees.  The Company shall reimburse Executive for the reasonable attorneys’ fees and costs incurred by Executive in connection with the review, negotiation and execution of this Agreement.  If either party is required to seek legal counsel to interpret or enforce the terms and provisions of this Agreement, the prevailing party in any action, suit or proceeding shall be entitled to recover reasonable attorneys’ fees and costs (including on appeal).

Section 17.       Miscellaneous; Survival. No provisions of this Agreement may be amended, modified, or waived unless such amendment or modification is agreed to in writing signed by Executive and by a duly authorized officer of the Company, and such waiver is set forth in writing and signed by the party to be charged.  No waiver by either party hereto at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not set forth expressly in this Agreement.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida without regard to its conflicts of law principles.  Each party unconditionally and irrevocably agrees that the exclusive forum and venue for any action, suit or proceeding shall be in Miami-Dade County, Florida, and consents to submit to the exclusive jurisdiction, including, without limitation, personal jurisdiction, and forum and venue of the Circuit Courts of the State of Florida or the United States District Court for the Southern District of Florida, in each case, located in Miami-Dade County, Florida.  Sections 8-12 and 14-23 of this Agreement shall survive any termination or expiration of this Agreement and the Employment Period.

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Section 18.       Validity.  The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.  In the event that any provision or provisions contained in this Agreement shall be deemed illegal or unenforceable, the remaining provisions contained in this Agreement shall remain in full force and effect, and this Agreement shall be interpreted as if such illegal or unenforceable provision or provisions were not contained in this Agreement.

Section 19.       Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

Section 20.       Entire Agreement.  This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, director, employee or representative of any party hereto in respect of such subject matter.  Any prior agreement of the parties hereto in respect of the subject matter contained herein is hereby terminated and canceled.

Section 21.       Withholding.  All payments hereunder shall be subject to any required withholding of Federal, state and local taxes pursuant to any applicable law or regulation.

Section 22.       Insurance; Indemnity. Executive shall be covered by the Company’s directors’ and officers’ liability insurance policy, and errors and omissions coverage, to the extent such coverage is generally provided by the Company to its directors and officers and to the fullest extent permitted by such insurance policies.  Nothing herein is or shall be deemed to be a representation by the Company that it provides, or a promise by the Company to obtain, maintain or continue any liability insurance coverage whatsoever for its executives.  In addition, the Company shall enter into its standard indemnity agreement by which Company commits to indemnify a Company officer in connection with claims, suits or proceedings arising as a result of Executive’ service to the Company.

Section 23.       Section Headings.  The section headings in this Agreement are for convenience of reference only, and they form no part of this Agreement and shall not affect its interpretation.

[Remainder of this Page Intentionally left Blank]

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The parties hereto have executed this Agreement effective as provided above.

EQUITY ONE, INC.
By:		/s/ Arthur L. Gallagher
	Name:	Arthur L. Gallagher
	Title:	EVP, General Counsel
	Date: March 30, 2009
/s/ Mark Langer
Mark Langer
	Date: March 30, 2009

Exhibit A – Form of Release

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EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Jeffrey S. Olson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Equity One, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosures controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal controls over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date:  May 11, 2009
	/s/ Jeffrey S. Olson
	Jeffrey S. Olson
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Mark Langer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Equity One, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a. Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosures controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to affect, the registrant’s internal controls over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

a. all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls.

Date: May 11, 2009
	/s/  Mark Langer
	Mark Langer
	Executive Vice President and Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. § 1350, as created by Section § 906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of Equity One, Inc. (the “Company”) hereby certify, to such officers’ knowledge, that:

(i) The accompanying Quarterly Report on Form 10-Q for the period ended March 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

May 11, 2009
	/s/ Jeffrey S. Olson
	Jeffrey S. Olson
	Chief Executive Officer

May 11, 2009
	/s/ Mark Langer
	Mark Langer
	Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished as an exhibit to the Report pursuant to Item 601(b)(32) of Regulation S-K and Section 906 of the Sarbanes-Oxley Act of 2002 and, accordingly, is not being filed with the Securities and Exchange Commission as part of the Report and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934 (whether made before or after the date of the Report, irrespective of any general incorporation language contained in such filing).