10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

X	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2010
or
□	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 000-51199
Inland Western Retail Real Estate Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland				42-1579325
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)
2901 Butterfield Road, Oak Brook, Illinois				60523
(Address of principal executive offices)				(Zip Code)
630-218-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: None				Name of each exchange on which registered: None
Securities registered pursuant to Section 12(g) of the Act: Title of class: Common stock, $.001 par value per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o      No  [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act.  Yes  o      No  [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   [X]         No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   o         No  o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [   ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer		□			Accelerated filer	o
Non-accelerated filer		[X]	(Do not check if a smaller reporting company)		Smaller reporting company	o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  o     No  [X]
Since no established market for the common stock of the registrant exists, there is no market value for such shares of common stock.
As of February 21, 2011, there were 478,868,220 shares of common stock outstanding.

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

TABLE OF CONTENTS

                                                                               PART I

                                                                               PART II

                                                                               PART III

                                                                               PART IV

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PART I

All amounts in this Form 10-K in Items 1. through 7A. are stated in thousands with the exception of per share amounts, square foot amounts, per square foot amounts, number of properties, number of states, number of leases, number of shareholders, number of tenants, number of employees and number of jobs.  In this report, all references to “we,” “our,” and “us” refer collectively to Inland Western Retail Real Estate Trust, Inc. and its subsidiaries, including consolidated joint ventures.

Item 1.  Business

General

We are a fully integrated, self-administered and self-managed real estate company that owns and operates high quality, strategically located shopping centers and single-user retail properties. We are one of the largest owners and operators of shopping centers in the United States. As of December 31, 2010, our retail operating portfolio consisted of 266 properties with approximately 35,766,000 square feet of gross leasable area, or GLA, was geographically diversified across 37 states and includes power centers, community centers, neighborhood centers and lifestyle centers, as well as single-user retail properties. Our retail properties are primarily located in strong retail districts within densely populated areas in highly visible locations with convenient access to interstates and major thoroughfares. Our retail properties are recently constructed, with a weighted average age, based on annualized base rent, or ABR, of only approxi mately 9.7 years since the initial construction or most recent major renovation. As of December 31, 2010, our retail operating portfolio was 88.7% leased, including leases signed but not commenced. In addition to our retail operating portfolio, as of December 31, 2010, we also held interests in 18 other operating properties, including 12 office properties and six industrial properties, 19 retail operating properties held by three unconsolidated joint ventures and eight retail properties under development.  The following summarizes our consolidated operating portfolio as of December 31, 2010:

Description	Number of Properties	GLA (in thousands)	Percent Leased	Percent Leased and Leases Signed (a)
Retail
Wholly-owned	211	29,224	86.0%	87.9%
Joint venture	55	6,542	90.4%	92.5%
Total retail	266	35,766	86.8%	88.7%
Office/Industrial
Wholly-owned	18	6,725	98.3%	98.3%
Total Consolidated Operating Portfolio	284	42,491	88.6%	90.2%
(a)  Includes leases signed but not commenced.

Our shopping centers are primarily anchored or shadow anchored by strong national and regional grocers, discount retailers and other retailers that provide basic household goods or clothing, including Target, TJX Companies, PetSmart, Best Buy, Bed Bath and Beyond, Home Depot, Kohl’s, Wal-Mart, Publix and Lowe’s.  As of December 31, 2010, over 90% of our shopping centers, based on GLA, were anchored or shadow anchored by a grocer, discount department store, wholesale club or retailers that sell basic household goods or clothing. Overall, we have a broad and highly diversified retail tenant base that includes approximately 1,600 tenants with no one tenant representing more than 3.2% of the total ABR generated from our retail operating properties, or our retail ABR.

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Business and Growth Strategies

Our primary objective is to provide attractive risk-adjusted returns for our shareholders by increasing our cash flow from operations and realizing long-term growth strategies. The strategies we intend to execute to achieve this objective include:

Maximize Cash Flow Through Internal Growth

We believe that we will be able to generate cash flow growth through the leasing of vacant space in our retail operating portfolio. As of December 31, 2010, our retail operating portfolio was 88.7% leased, including leases signed but not commenced, and had 4,059,000 square feet of available space, including a significant amount of space that was previously occupied by big box anchor and junior anchor tenants. As of December 31, 2010, we had approximately 697,000 square feet of GLA of signed leases that had not commenced. We believe the leasing of our vacant space provides a significant growth opportunity for our shareholders, particularly in light of the expansion plans that have been announced by a number of our largest retail tenants.

Asset Preservation and Appreciation through Creative Transactions

We actively manage our portfolio focusing primarily on leasing opportunities, but also focus on redevelopment, expansion and remerchandising opportunities.  In pursuing these opportunities, we focus on increasing operating income and cash flows, active risk mitigation and tenant retention. Additional value enhancing strategies include cost reductions, long-term capital planning and asset sustainability initiatives.

Recycle Capital Through Disposition of Non-Core Assets

We plan to pursue opportunistic dispositions of the non-retail properties and free-standing triple net retail properties in our operating portfolio in order to redeploy capital to continue to build our interest in well located, high quality shopping centers. In addition to our retail operating portfolio, as of December 31, 2010, we held interests in 18 other operating properties, including 12 office properties and six industrial properties, which had a total of 6,725,000 square feet of GLA and represent 10.7% of our consolidated operating portfolio based on ABR. We believe that the disposition of these non-retail properties, along with select triple net retail properties, will serve as a source of capital for the growth of our retail portfolio.  As we have in the past, we intend to take advantage of opportunities that may arise to sell assets in our portfolio.  From the end of 2007 through December 31, 2010, we have sold 20 properties for an aggregate sales price of $713,492, including $465,803 of debt that was assumed, forgiven or repaid.  We plan to continue to pursue strategic dispositions to continue to focus our portfolio on well located, high quality shopping centers.

Pursue Acquisitions of High Quality Retail Properties

We intend to pursue disciplined and targeted acquisitions of retail properties that meet our retail property and market selection criteria and will further our strategy of focusing on well located, high quality shopping centers.  Utilizing our senior management team’s expertise, we intend to opportunistically acquire retail properties based on identified market and property characteristics, including: property classification, anchor tenant type, lease terms, geographic markets and demographics.  We believe the high level of diversification of our tenant base limits our exposure to any single tenant and allows us to take advantage of growth opportunities through the expansion of our existing relationships without significantly increasing our exposure to any single tenant.  We believe that over the next several years the continued market disruption in the real estate market may create opportunities to acquire reta il properties that meet our investment criteria from owners facing operational and financial stress.  Based on our operational expertise and capital resources, we believe that we are well positioned to take advantage of opportunities to acquire retail properties.  We plan to pursue acquisitions directly and through joint ventures.  

Pursue Strategic Joint Ventures to Leverage Management Platform

We intend to leverage our leasing and property management platform through the strategic formation, capitalization and management of joint ventures.  In the past, we have partnered with strong institutional capital providers to supplement our capital base in a manner accretive to our shareholders.  Such joint ventures are as follows:

On May 20, 2010, we entered into definitive agreements to form a joint venture with a wholly-owned affiliate of RioCan Real Estate Investment Trust (RioCan), a real estate investment trust (REIT) based in Canada.  The initial RioCan joint

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venture investment included eight grocery and necessity-based-anchored shopping centers located in Texas. Under the terms of the agreements, RioCan contributed cash for an 80% interest in the venture and we contributed a 20% interest in the properties.  The joint venture acquired an 80% interest in the properties from us in exchange for cash, each of which was accounted for as a partial sale of real estate.  Each property closing occurred individually over time based on timing of lender consent or refinance of the related mortgages payable.  We will earn property management, asset management and other customary fees on the joint venture.  Certain of the properties contain earn-out provisions which, if met, would result in additional sales proceeds to us.  As of December 31, 2010, the joint venture had acquired eight properties from us for a purchase price of $159,442, and had assumed from us mortgages payab le on these properties totaling approximately $97,888.  In addition, we have received additional earnout proceeds of $476 during the year ended December 31, 2010.  These transactions did not qualify as discontinued operations in the consolidated statements of operations and other comprehensive loss as a result of our 20% ownership in the joint venture.

On November 29, 2009, we formed IW JV 2009, LLC (IW JV), a wholly-owned subsidiary, and transferred a portfolio of 55 investment properties and the entities which owned them.  Subsequently, in connection with a $625,000 debt refinancing transaction, which consisted of $500,000 of mortgages payable and $125,000 of notes payable, on December 1, 2009, we raised additional capital of $50,000 from a related party, Inland Equity Investors, LLC (Inland Equity) in exchange for a 23% noncontrolling interest in IW JV.  IW JV, which is controlled by us, and therefore consolidated, has an aggregate of $1,002,747 in total assets and will continue to be managed and operated by us.  Inland Equity is owned by certain individuals, including Daniel L. Goodwin, who beneficially owns more than 5% of our common stock, and Robert D. Parks, who was the Chairman of our Board until October 12, 2010 and who is the Chairman of the Board of cer tain affiliates of The Inland Group, Inc.  

Effective April 27, 2007, we formed a strategic joint venture with a large state pension fund.  Under the joint venture agreement, we contributed 20% of the equity and our joint venture partner contributed 80% of the equity.  As of December 31, 2010, the joint venture had acquired seven properties (which we contributed) with a purchase price of approximately $336,000 and had assumed from us mortgages payable on these properties totaling approximately $188,000.

Based on our operational expertise in the retail real estate space, we believe that we are well positioned to continue to strategically pursue additional joint ventures with high quality capital partners.  Additionally, from time to time, we may form partnerships with regional developers that allow us to maximize returns on completed developments and access strategic local markets.  

Maintain Our Development Activity at Sustainable Levels

The following table provides summary information regarding our consolidated and unconsolidated properties under development as of December 31, 2010. As of December 31, 2010, we did not have any active construction ongoing at our development properties, and, currently, we only intend to develop the remaining estimated total GLA to the extent that we have pre-leased the space to be developed. If we were to pre-lease all of the remaining estimated GLA, we estimate that the total remaining costs to complete the development of this space would be $55,754, which we expect to fund through construction loans and proceeds of potential sales of our Bellevue Mall and South Billings Center development properties. As of December 31, 2010, the ABR from the portion of our development properties with respect to which construction has been completed was $5,300.

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		Our Ownership		Carrying Value at		Construction Loan Balance at
Location	Description	Percentage		December 31, 2010 (a)		December 31, 2010
Frisco, Texas	Parkway Towne Crossing	75.0%	$	26,085	$	20,757
Dallas, Texas	Wheatland Towne Crossing	75.0%		14,825		5,712
Henderson, Nevada	Lake Mead Crossing	25.0%		81,597		48,949
Henderson, Nevada	Green Valley Crossing	50.0%		23,750		11,350
Billings, Montana	South Billings Center	40.0%		5,077		-
Nashville, Tennessee	Bellevue Mall	100.0%		26,448		-
Denver, Colorado	Hampton Retail Colorado	95.8%		6,836	(b)	4,031	(c)
			$	184,618	$	90,799
(a) Represents the total investment less accumulated depreciation
(b) Represents the total investment less accumulated depreciation for the two properties under development.  There is an additional $19,447 of carrying value related to four operational properties held by the joint venture.
(c) The construction loan balance includes only the portion related to two properties under development held by the joint venture.  There is an additional $16,367 construction loan related to four operational properties held by the joint venture.

Tax Status

We elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, or the Code.  Subject to the discussions contained in Item 1A. “Risk Factors” regarding the closing agreement that we have requested from the Internal Revenue Service, or IRS, we believe that we have been organized, owned and operated in conformity with the requirements for qualification and taxation as a REIT under the Code beginning with our taxable year ended December 31, 2003, and that our intended manner of ownership and operation will enable us to continue to meet the requirements for qualification and taxation as a REIT for federal income tax purposes.  To maintain our qualification as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute at least 90% of our REIT taxable income to our shareholders, determined without regard to the deduction for dividends paid and excluding net capital gains.  As a REIT, we generally are not subject to U.S. federal income tax on the taxable income we currently distribute to our shareholders.  If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. federal income tax at regular corporate rates.  Even if we qualify for taxation as a REIT, we may be subject to some U.S. federal, state and local taxes on our income or property.  We have one wholly-owned consolidated subsidiary that has elected to be treated as a taxable REIT subsidiary, or TRS, for federal income tax purposes. A TRS is taxed on its net income at regular corporate tax rates.  The income tax expense incurred as a result of the TRS has not had a material impact on our consolidated financial statements.  

Competition

In seeking new investment opportunities, we compete with other real estate investors, including pension funds, insurance companies, foreign investors, real estate partnerships, other REITs, private individuals and other real estate companies, some of which have greater financial resources than we do.  With respect to properties presently owned by us, we compete with other owners of like properties for tenants.  There can be no assurance that we will be able to successfully compete with such entities in development, acquisition, and leasing activities in the future.

Our business is inherently competitive.  Property owners, including us, compete on the basis of location, visibility, quality and aesthetic value of construction, volume of traffic, strength and name recognition of tenants and other factors.  These factors combine to determine the level of occupancy and rental rates that we are able to achieve at our properties.  Further, our tenants compete with other forms of retailing, including e-commerce, catalog companies and direct consumer sales.  We may, at times, compete with newer properties or those in more desirable locations.  To remain competitive, we evaluate all of the factors affecting our centers and try to position them accordingly.  For example, we may decide to focus on renting space to specific retailers who will complement our existing tenants and increase traffic. & nbsp; We believe the principal factors that retailers consider in making their leasing decisions include:

·

consumer demographics

·

quality, design and location of properties

·

total number and geographic distribution of properties

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·

diversity of retailers and anchor tenants at shopping center locations

·

management and operational expertise

·

rental rates

Based on these factors, we believe that the size and scope of our property portfolio, as well as the overall quality and attractiveness of our individual properties, enable us to compete effectively for retail tenants in our local markets. Because our revenue potential may be linked to the success of retailers, we indirectly share exposure to the same competitive factors that our retail tenants experience in their respective markets when trying to attract individual shoppers. These dynamics include general competition from other regional shopping centers, including outlet malls and other discount shopping centers, as well as competition with discount shopping clubs, catalog companies, Internet sales and telemarketing.

Operating History

We are a Maryland corporation formed in March 2003, and we have been publicly held and subject to U.S. Securities and Exchange Commission, or SEC, reporting obligations since the completion of our first public offering in 2003. As of December 31, 2010, we had over 111,000 shareholders of record. We were initially sponsored by The Inland Group, Inc., (The Inland Group) and its affiliates, but we have not been affiliated with The Inland Group since the internalization of our management in November 2007.

On November 15, 2007, pursuant to an agreement and plan of merger, approved by our shareholders on November 13, 2007, we acquired, through a series of mergers, four entities affiliated with our former sponsor, Inland Real Estate Investment Corporation, which entities provided business management/advisory and property management services to us. Shareholders of the acquired entities received an aggregate of 37,500 shares of our common stock, valued under the merger agreement at $10.00 per share. In December 2010, certain of the shareholders returned 9,000 shares of our common stock to us in connection with our settlement of a lawsuit relating to this acquisition. As a result of the mergers, we now perform substantially all of our key operational activities internally. In connection with the mergers, we and our former business manager/advisor or our former property managers entered into a number agreements and amendments to agreements , with The Inland Group and certain of its affiliates. See Item 13. “Certain Relationships and Related Transactions.”

Regulation

General

The properties in our portfolio are subject to various laws, ordinances and regulations, including regulations relating to common areas. We believe each of the existing properties has the necessary permits and approvals to operate its business.

Americans with Disabilities Act

Our properties must comply with Title III of the Americans with Disabilities Act, or ADA, to the extent that such properties are “public accommodations” as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. We believe the existing properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations as appropriate in this respect.

Environmental Matters

Under various federal, state or local laws, ordinances and regulations, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or release of hazardous substances, waste, or petroleum products at, on, in, under or from such property, including costs for investigation, remediation, natural resource damages or third party liability for personal injury or property damage. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such materials, and the

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liability may be joint and several. In addition, the presence of contamination or the failure to remediate contamination at our properties may adversely affect our ability to sell, redevelop, or lease such property or to borrow using the property as collateral. Environmental laws also may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which that property may be used or how businesses may be operated on that property. Some of our properties have been or may be impacted by contamination arising from current or prior uses of the property or adjacent properties for commercial or industrial purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store such materials. We also may b e liable for the costs of remediating contamination at off-site disposal or treatment facilities when we arrange for disposal or treatment of hazardous substances at such facilities, without regard to whether we comply with environmental laws in doing so.

Independent environmental consultants have conducted Phase I Environmental Site Assessments or similar environmental audits for all our investment properties at the time they were acquired. A Phase I Environmental Site Assessment is a written report that identifies existing or potential environmental conditions associated with a particular property. These environmental site assessments generally involve a review of records and visual inspection of the property but do not include soil sampling or ground water analysis. These environmental site assessments have not revealed, nor are we aware of, any environmental liability that we believe will have a material adverse effect on our operations. These environmental site assessments have a limited scope, however, and may not reveal all potential environmental liabilities. Further, material environmental conditions may have arisen after the review was completed or may arise in the future, and future laws, ordinances or regulations may impose additional material environmental liability beyond what was known at the time the site assessment was conducted.  

In addition, our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management of wastes and underground and aboveground storage tanks.  Noncompliance with these environmental, health and safety laws could subject us or our tenants to liability.  These environmental liabilities could affect a tenant’s ability to make rental payments to us. Moreover, changes in laws could increase the potential costs of compliance with environmental laws, health and safety laws or increase liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations, or those of our tenants, which could in turn have a material adverse effect on us.  

As the owner or operator of real property, we may also incur liability based on various building conditions.  For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing material, or ACM.  Environmental, health, and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements. These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, renovation, or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment.  

We also may incur liability arising from mold growth in the buildings we own or operate. When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or increase ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants, or others if property damage or personal injury occurs.

Insurance

We carry comprehensive liability, fire, extended coverage, earthquake, terrorism and rental loss insurance covering all of the properties in our portfolio under a blanket policy. We believe the policy specifications and insured limits are appropriate given the relative risk of loss, the cost of the coverage and industry practice and, in the opinion of our management, the properties in our portfolio are adequately insured. Our terrorism insurance is subject to exclusions for

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loss or damage caused by nuclear substances, pollutants, contaminants and biological and chemical weapons. We do not carry insurance for generally uninsured losses such as loss from riots or acts of God. In addition, we carry terrorism insurance on all of our properties in an amount and with deductibles which we believe are commercially reasonable. See Item 1A. “Risk Factors” for more information.

Employees

As of December 31, 2010, we had 252 employees.  

Access to Company Information

We electronically file our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports and proxy statements with the SEC.  The public may read and copy any of the reports that are filed with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330.  The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically.

We make available, free of charge, through our website and by responding to requests addressed to our investor relations group, our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports and proxy statements.  These reports are available as soon as reasonably practical after such material is electronically filed or furnished to the SEC. Our website address is www.inland-western.com.  The information contained on our website, or other websites linked to our website, is not part of this document.

Shareholders wishing to communicate directly with the board of directors or any committee can do so by writing to the attention of the Board of Directors or committee in care of Inland Western Retail Real Estate Trust, Inc. at 2901 Butterfield Road, Oak Brook, Illinois 60523.

Item 1A. Risk Factors  

In evaluating our company, careful consideration should be given to the following risk factors, in addition to the other information included in this annual report.  Each of these risk factors could adversely affect our business operating results and/or financial condition, as well as adversely affect the value of an investment in our stock.  In addition to the following disclosures, please refer to the other information contained in this report including the consolidated financial statements and the related notes.

RISKS RELATING TO OUR BUSINESS AND OUR PROPERTIES

There are inherent risks associated with real estate investments and with the real estate industry, each of which could have an adverse impact on our economic performance and the value of our retail properties.  

Real estate investments are subject to various risks and fluctuations and cycles in value and demand, many of which are beyond our control.  Our economic performance and the value of our properties can be affected by many of these factors, including the following:

·

adverse changes in financial conditions of buyers, sellers and tenants of our properties, including bankruptcies, financial difficulties, or lease defaults by our tenants;

·

the national, regional and local economy, which may be negatively impacted by concerns about inflation, deflation and government deficits, high unemployment rates, decreased consumer confidence, industry slowdowns, reduced corporate profits, liquidity concerns in our markets and other adverse business concerns;

·

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

·

vacancies or ability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights or below-market renewal options;

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·

changes in operating costs and expenses, including, without limitation, increasing labor and material costs, insurance costs, energy prices, environmental restrictions, real estate taxes, and costs of compliance with laws, regulations and government policies, which we may be restricted from passing on to our tenants;

·

fluctuations in interest rates, which could adversely affect our ability, or the ability of buyers and tenants of properties, to obtain financing on favorable terms or at all;

·

competition from other real estate investors with significant capital, including other real estate operating companies, publicly traded REITs and institutional investment funds;

·

the convenience and quality of competing retail properties and other retailing options such as the Internet;

·

perceptions by retailers or shoppers of the safety, convenience and attractiveness of the retail property;

·

inability to collect rent from tenants;

·

our ability to secure adequate insurance;

·

our ability to provide adequate management services and to maintain our properties;

·

changes in, and changes in enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning and tax laws, government fiscal policies and the ADA; and

·

civil unrest, acts of war, terrorist attacks and natural disasters, including earthquakes and floods, which may result in uninsured and underinsured losses.

In addition, because the yields available from equity investments in real estate depend in large part on the amount of rental income earned, as well as property operating expenses and other costs incurred, a period of economic slowdown or recession, declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults among our existing leases, and, consequently, our properties, including those held by joint ventures, may fail to generate revenues sufficient to meet operating debt service and other expenses.  As a result, we may have to borrow amounts to cover fixed costs, and our financial condition, results of operations, cash flow and our ability to satisfy our principal and interest obligations and to make distributions to our shareholders may be adversely affected.

Continued economic weakness from the severe economic recession that the U.S. economy recently experienced may materially and adversely affect our financial condition and results of operations.

The U.S. economy is still experiencing weakness from the severe recession that it recently experienced, which resulted in increased unemployment, the bankruptcy or weakened financial condition of a number of large retailers, decreased consumer spending, a decline in residential and commercial property values and reduced demand and rental rates for retail space.  Although the U.S. economy has emerged from the recent recession, high levels of unemployment have persisted, and rental rates and valuations for retail space have not fully recovered to pre-recession levels and may not for a number of years. If the economic recovery slows or stalls, we may continue to experience downward pressure on the rental rates we are able to charge as leases signed prior to the recession expire, and tenants may declare bankruptcy, announce store closings or fail to meet their lease obligations, any of which could adversely affect our cash flow, f inancial condition and results of operations.

Substantial international, national and local government spending and increasing deficits may adversely impact our business, financial condition and results of operations.

The values of, and the cash flows from, the properties we own are affected by developments in global, national and local economies.  As a result of the recent severe recession and the significant government interventions, federal, state and local governments have incurred record deficits and assumed or guaranteed liabilities of private financial institutions or other private entities.  These increased budget deficits and the weakened financial condition of federal, state and local governments may lead to reduced governmental spending, tax increases, public sector job losses, increased interest rates, currency devaluations or other adverse economic events, which may directly or indirectly adversely affect our business, financial condition and results of operations.

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We face significant competition in the leasing market, which may decrease or prevent increases in the occupancy and rental rates of our properties.

We have acquired and intend to continue to acquire properties located in developed areas.  Consequently, we compete with numerous developers, owners and operators of retail properties, many of which own properties similar to, and in the same market areas as, our properties.  If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates below those we currently charge in order to attract new tenants and retain existing tenants when their leases expire.  Also, if our competitors develop additional retail properties in locations near our properties, there may be increased competition for customer traffic and creditworthy tenants, which may result in fewer tenants or decreased cash flow from tenants, or both, and may require us to make capital improvements to properties that we would not have otherwise made.  As a result, our financial condition and our ability to make distributions to our shareholders may be adversely affected.

We may be required to make rent or other concessions and/or significant capital expenditures to improve our properties in order to retain and attract tenants, which could adversely affect our financial condition, results of operations and cash flow.

To the extent adverse economic conditions continue in the real estate market and demand for retail space remains low, we may be required to offer more substantial rent abatements, tenant improvements and early termination rights or accommodate requests for renovations, build-to-suit remodeling and other improvements or provide additional services to our tenants. As a result, we may have to make significant capital or other expenditures in order to retain tenants whose leases expire and to attract new tenants in sufficient numbers, which could adversely affect our results of operations and cash flow. Additionally, if we need to raise capital to make such expenditures and are unable to do so, or such capital is otherwise unavailable, we may be unable to make the required expenditures. This could result in non-renewals by tenants upon expiration of their leases, which could adversely affect to our financial condition, results of op erations and cash flow.

The actual rents we receive for the properties in our portfolio may be less than our asking rents, and we may experience a lease roll-down from time to time, which may adversely affect our financial condition, results of operations and cash flow.

Our operating results depend upon our ability to maintain and increase rental rates at our properties while also maintaining or increasing occupancy.  As a result of various factors, including competitive pricing pressure in our markets, the recent severe recession and the desirability of our properties compared to other properties in our markets, the rental rates that we charge tenants have generally declined and our ability to maintain our current rental rates or increase those rates in the future may be limited.  Further, because current rental rates have declined as compared to expiring leases in our portfolio, the rental rates for expiring leases may be higher than starting rental rates for new leases and we may be required to offer greater rental concessions than we have historically.  The degree of discrepancy between our previous asking rents and the actual rents we are able to obtain upon the expiration of our leases may vary both from property to property and among different leased spaces within a single property. If we are unable to obtain sufficient rental rates across our portfolio, our results of operations and cash flow and our ability to satisfy our debt obligations and make distributions to our shareholders will be adversely affected.  

We have experienced aggregate net losses attributable to Company shareholders for the years ended December 31, 2010, 2009 and 2008, and we may experience future losses.

We had net losses attributable to Company shareholders of approximately $95,843, $112,335 and $683,727 for the years ended December 31, 2010, 2009 and 2008, respectively.  If we continue to incur net losses in the future or such losses increase, our financial condition, results of operations, cash flow and our ability to service our indebtedness and make distributions to our shareholders would be materially and adversely affected.

We have a high concentration of properties in the Dallas-Fort Worth-Arlington area, and adverse economic and other developments in that area could have a material adverse effect on us.

As of December 31, 2010, approximately 11.0% of the GLA and approximately 14.2% of the ABR from our retail operating portfolio were represented by properties located in the Dallas-Fort Worth-Arlington area. As a result, we are

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particularly susceptible to adverse economic and other developments in this area, including increased unemployment, industry slowdowns, business layoffs or downsizing, decreased consumer confidence, relocations of businesses, changes in demographics, increases in real estate and other taxes, increased regulation, and natural disasters, any of which could have a material adverse effect on us.

Our inability to collect rents from tenants may negatively impact our financial condition and our ability to make distributions to our shareholders.  

Substantially all of our income is derived from rentals of real property.  Therefore, our financial condition, results of operations and cash flow materially depend on the financial stability of our tenants, any of which may experience a change in their business at any time, and our ability to continue to lease space in our properties on economically favorable terms.  If the sales of stores operating in our centers decline sufficiently, tenants might be unable to pay their existing minimum rents or expense recovery charges, since these rents and charges would represent a higher percentage of their sales, and new tenants might be less willing to pay minimum rents as high as they would otherwise pay.  Further, tenants may delay lease commencements, decline to extend or renew a lease upon its expiration or on favorable terms, or exercise early termination rights (to the extent avai lable).  If a number of our tenants are unable to make their rental payments to us and otherwise meet their lease obligations, our ability to meet debt and other financial obligations and to make distributions to our shareholders may be adversely affected.

We may be unable to renew leases, lease vacant space or re-let space as leases expire, which could adversely affect our financial condition and results of operations.

We cannot assure you that leases will be renewed or that our properties will be re-let at net effective rental rates equal to or above the current average net effective rental rates or that substantial rent abatements, tenant improvements, early termination rights or below-market renewal options will not be offered to attract new tenants or retain existing tenants.  If the rental rates for our properties decrease, our existing tenants do not renew their leases or we do not re-let a significant portion of our available space and space for which leases will expire, our financial condition, results of operations, cash flow and cash available for distributions.

If any of our anchor tenants experience a downturn in their business or terminate their leases, our financial condition and results of operations could be adversely affected.

Our financial condition and results of operations could be adversely affected in the event of a downturn in the business, or the bankruptcy or insolvency, of any anchor store or anchor tenant, particularly an anchor tenant with multiple store locations.  Anchor tenants generally occupy large amounts of square footage, pay a significant portion of the total rents at a property and contribute to the success of other tenants by drawing significant numbers of customers to a property.  The closing of one or more anchor stores at a property could adversely affect that property and result in lease terminations by, or reductions in rent from, other tenants whose leases permit termination or rent reduction in those circumstances or whose own operations may suffer as a result of the anchor store closing.  For example, in 2008 and 2009, three of our anchor tenants, Mervyns, Linens ‘n Things and Circuit City, declared bankruptcy, resulting in approximately 3,245,000 square feet of vacant retail space and a decrease in rental income of approximately $34,838.  Additional bankruptcies or insolvencies of, or store closings by, our anchor tenants could significantly increase vacancies and reduce our rental income. If we are unable to re-let such space on similar terms and in a timely manner, our financial condition, results of operations and ability to make distributions to our shareholders could be materially and adversely affected.

Many of the leases at our retail properties contain “co-tenancy” or “go-dark” provisions, which, if triggered, may allow tenants to pay reduced rent, cease operations or terminate their leases, any of which could adversely affect our financial condition and results of operations and/or the value of the applicable property.

Many of the leases at our retail properties contain “co-tenancy” provisions that condition a tenant’s obligation to remain open, the amount of rent payable by the tenant or the tenant’s obligation to continue occupancy on certain conditions, including: (i) the presence of a certain anchor tenant or tenants; (ii) the continued operation of an anchor tenant’s store; and (iii) minimum occupancy levels at the applicable property. If a co-tenancy provision is triggered by a failure of any of these or other applicable conditions, a tenant could have the right to cease operations at the applicable property, terminate its lease early or have its rent reduced. In periods of prolonged economic decline such as the recent recession, there is a higher than normal risk that co-tenancy provisions will be triggered due to the higher risk of tenants closing stores or terminating leases during these periods. For example, the effects of recent tenant bankruptcies triggered some co-tenancy

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clauses in certain other tenant leases, which provided certain of these tenants with immediate reductions in their annual rents and permitted them to terminate their leases if an appropriate replacement was not found within the allotted time period. In addition to these co-tenancy provisions, certain of the leases at our retail properties contain “go-dark” provisions that allow the tenant to cease operations at the applicable property while continuing to pay rent. This could result in decreased customer traffic at the applicable property, thereby decreasing sales for our other tenants at that property, which may result in our other tenants being unable to pay their minimum rents or expense recovery charges. These provisions also may result in lower rental revenue generated under the applicable leases. To the extent co-tenancy or go-dark provisions in our retail leases result in lower revenue or tenant sales or in tenants& #146; rights to terminate their leases early or to have their rent reduced, our financial condition and results of operations and the value of the applicable property could be adversely affected.

We may be unable to collect balances due on our leases from any tenants in bankruptcy, which could adversely affect our cash flow and the amount of cash available for distribution to our shareholders.

Our leases generally do not contain provisions designed to ensure the creditworthiness of the tenant, and a number of companies in the retail industry, including some of our tenants, have declared bankruptcy or voluntarily closed certain of their stores in recent years.  We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent.  Any or all of the tenant’s or a guarantor of a tenant’s lease obligations could be subject to a bankruptcy proceeding pursuant to Chapter 11 or Chapter 7 of the bankruptcy laws of the United States.  Such a bankruptcy filing would bar all efforts by us to collect pre-bankruptcy rents from these entities or their properties, unless we receive an order from the bankruptcy court permitting us to do so.  A tenant or lease guarantor bankruptcy could delay our efforts to collect past due balan ces under the relevant leases, and could ultimately preclude collection of these sums.  If a lease is rejected by a tenant in bankruptcy, we would only have a general unsecured claim for damages.  This claim could be paid only in the event funds were available, and then only in the same percentage as that realized on other unsecured claims, and our claim would be capped at the rent reserved under the lease, without acceleration, for the greater of one year or 15% of the remaining term of the lease, but not greater than three years, plus rent already due but unpaid. Therefore, if a lease is rejected, it is unlikely we would receive any payments from the tenant, or we would receive substantially less than the full value of any unsecured claims we hold, which would result in a reduction in our rental income, cash flow and in the amount of cash available for distribution to our shareholders.  In particular, on February 16, 2011, Borders Group, Inc. (Borders), a national retailer, filed for bankrup tcy under Chapter 11.  As of December 31, 2010, Borders leased approximately 220,000 square feet of space from us at 10 locations, which leases represented approximately $2,600 of ABR. In addition, Borders leased approximately 28,000 square feet of space at one of our unconsolidated joint venture properties, which represented $344 of ABR.  Borders has informed us that it intends to close stores at five locations where it leased space from us, representing approximately 115,000 square feet of GLA and $1,119 of ABR as of December 31, 2010.

Our expenses may remain constant or increase, even if income from our properties decreases, causing our financial condition and results of operations to be adversely affected.

Costs associated with our business, such as mortgage payments, real estate and personal taxes, insurance, utilities and corporate expenses, are relatively inflexible and generally do not decrease, and may increase, when a property is not fully occupied, rental rates decrease, a tenant fails to pay rent or other circumstances cause our revenues to decrease. If we are unable to decrease our operating costs when our revenue declines, our financial condition, results of operations and ability to make distributions to our shareholders may be adversely affected. In addition, inflationary price increases could result in increased operating costs for us and our tenants and, to the extent we are unable to pass along those price increases or are unable to recover operating expenses from tenants, our operating expenses may increase, which could adversely affect our financial condition, results of operations and ability to make distributions t o our shareholders.

Real estate related taxes may increase and if these increases are not passed on to tenants, our net income will be reduced.  

Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay state and local taxes on our properties. The real property taxes may increase as property values or assessment rates change or as our properties are assessed or reassessed by taxing authorities. An increase in the assessed valuation of a property for real estate tax purposes will result in an increase in the related real estate taxes on that property. Although some leases may permit us to pass through such tax increases to our tenants, there is no assurance that renewal leases or future leases will be negotiated

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on the same basis.  If our property taxes increase and we are unable to pass those increases through to our tenants, our net income and cash available for distribution to our shareholders could be adversely affected.

We may be unable to complete acquisitions and, even if acquisitions are completed, we may fail to successfully operate acquired properties.

We continue to evaluate the market of available properties and may acquire properties when we believe strategic opportunities exist. Our ability to acquire properties on favorable terms and successfully operate or develop them is subject to the following risks:

·

we may be unable to acquire a desired property because of competition from other real estate investors with substantial capital, including from publicly traded REITs and institutional investment funds;

·

even if we are able to acquire a desired property, competition from other potential acquirers may significantly increase the purchase price;

·

even if we enter into agreements for the acquisition of properties, these agreements are subject to customary conditions to closing, including completion of due diligence investigations to our satisfaction;

·

we may incur significant costs and divert management attention in connection with evaluation and negotiation of potential acquisitions, including ones that we are subsequently unable to complete;

·

we may acquire properties that are not initially accretive to our results upon acquisition, and we may not successfully manage and lease those properties to meet our expectations;

·

we may be unable to finance the acquisition on favorable terms in the time period we desire, or at all;

·

even if we are able to finance the acquisition, our cash flow may be insufficient to meet our required principal and interest payments;

·

we may spend more than budgeted to make necessary improvements or renovations to acquired properties;

·

we may be unable to quickly and efficiently integrate new acquisitions, particularly acquisition of portfolios of properties, into our existing operations, and as a result our results of operations and financial condition could be adversely affected;

·

market conditions may result in higher than expected vacancy rates and lower than expected rental rates; and

·

we may acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities for clean-up of undisclosed environmental contamination, claims by tenants or other persons dealing with former owners of the properties and claims for indemnification by general partners, directors, officers and others indemnified by the former owners of the properties.

If we cannot finance property acquisitions in a timely manner and on favorable terms, or operate acquired properties to meet our financial expectations, our financial condition, results of operations, cash flow and ability to satisfy our principal and interest obligations and to make distributions to our shareholders could be adversely affected.

We depend on external sources of capital that are outside of our control, which may affect our ability to seize strategic opportunities, satisfy our debt obligations and make distributions to our shareholders.

In order to maintain our qualification as a REIT, we are generally required under the Code to annually distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, as a REIT, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our REIT taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including any necessary acquisition financing, from operating cash flow. Consequently, we may rely on third-party sources to fund our capital needs. We may not be able to obtain the financing on favorable terms, in the time period we desire, or at all. Any additional debt we incur will increase our leverage, expose us to the risk of default and may impose operating restrictions on us, and any additiona l equity we raise could be dilutive to existing shareholders. Our access to third-party sources of capital depends, in part, on:

·

general market conditions;

·

the market’s view of the quality of our assets;

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·

the market’s perception of our growth potential;

·

our current debt levels;

·

our current and expected future earnings, and

·

our cash flow and cash distributions.

If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, satisfy our principal and interest obligations or make the cash distributions to our shareholders necessary to maintain our qualification as a REIT.

We may be unable to sell a property at the time we desire and on favorable terms or at all, which could inhibit our ability to utilize our capital to make strategic acquisitions and could adversely affect our results of operations, financial condition and ability to make distributions to our shareholders.  

Real estate investments generally cannot be sold quickly.  Our ability to dispose of properties on advantageous terms depends on factors beyond on our control, including competition from other sellers and the availability of attractive financing for potential buyers of our properties, and we cannot predict the various market conditions affecting real estate investments that will exist at any particular time in the future.  In addition, the Code generally imposes a 100% tax on gain recognized by REITs upon the disposition of assets if the assets are held primarily for sale in the ordinary course of business, rather than for investment, which may cause us to forego or defer sales of properties that otherwise would be attractive from a pre-tax perspective.  As a result of such tax laws and the uncertainty of market conditions, our ability to promptly make changes to our portfolio as necessary to respond to economic and other conditions may be limited, and we cannot provide any assurance that we will be able to sell such properties at a profit, or at all.  Accordingly, our ability to access capital through dispositions may be limited which could limit our ability to acquire properties strategically and pay down indebtedness and would limit our ability to make distributions to our shareholders.  

In addition, certain of our leases contain provisions giving the tenant a right to purchase the property, which can take the form of a fixed price purchase option, a fair market value purchase option, a put option, a right of first refusal or a right of first offer.  When acquiring a property in the future, we may also agree to restrictions that prohibit the sale of that property for period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property.  These provisions may restrict our ability to sell a property at opportune times or on favorable terms and, as a result, may adversely impact our cash flows and results of operations.

Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold.  We cannot assure our shareholders that we will have funds available to correct such defects or to make such improvements and, therefore, we may be unable to sell the asset or may have to sell it at a reduced cost.  

Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers.  

We have made and may continue to make investments in joint ventures or other partnership arrangements between us and our joint venture partners.  As of December 31, 2010, we held 55 operating properties (as well as a portion of one other property) with 6,853,000 square feet of GLA in two consolidated joint ventures and 19 operating properties with 2,665,000 square feet of GLA in three unconsolidated joint ventures.  Investments in joint ventures or other partnership arrangements involve risks not present were a third party not involved, including the following:

·

we do not have exclusive control over the development, financing, leasing, management and other aspects of the property or joint venture, which may prevent us from taking actions that are in our best interest but opposed by our partners;

·

prior consent of our joint venture partners may be required for a sale or transfer to a third party of our interest in the joint venture, which would restrict our ability to dispose of our interest in the joint venture;

·

two of our unconsolidated operating joint venture agreements have, and future joint venture agreements may contain, buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner;  

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·

our partners might become bankrupt or fail to fund their share of required capital contributions necessary to refinance debt or to fund tenant improvements or development or renovation projects for the joint venture properties, which may force us to contribute more capital than we anticipated to cover the joint venture’s liabilities;

·

our partners may have competing interests in our markets that could create conflict of interest issues;

·

our partners may have economic or business interests or goals that are inconsistent with our interests or goals and may take actions contrary to our instructions, requests, policies or objectives;

·

two of our joint venture agreements have, and future joint venture agreements may contain, provisions limiting our ability to solicit or otherwise attempt to persuade any tenant to relocate to another property not owned by the joint venture;

·

our partners may take actions that could jeopardize our REIT status or require us to pay tax;

·

actions by partners might subject real properties owned by the joint venture to liabilities greater than those contemplated by the terms of the joint venture or other adverse consequences that may reduce our returns;

·

disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business and could result in subjecting properties owned by the partnership or joint venture to additional risk; and

·

we may in certain circumstances be liable for the actions of our third-party partners or co-venturers.

If any of the foregoing were to occur, our financial condition, results of operations and cash available for distribution to our shareholders could be adversely affected.

Our development and construction activities have inherent risks, which could adversely impact our results of operations and cash flow.

Our construction and development activities include risks that are different and, in most cases, greater than the risks associated with our acquisition of fully developed and operating properties.  We may provide a completion of construction and principal guaranty to the construction lender. As a result of such a guaranty, we may subject a property to liabilities in excess of those contemplated and thus reduce our return to investors.

In addition to the risks associated with real estate investments in general as described elsewhere, the risks associated with our development activities include:

·

significant time lag between commencement and stabilization subjects us to greater risks due to fluctuations in the general economy, including national, regional and local economic downturns, and shifts in demographics;

·

expenditure of money and time on projects that may never be completed;

·

occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable;

·

inability to achieve projected occupancy and/or rental rates per square foot within the projected time frame, if at all;

·

failure or inability to obtain construction or permanent financing on favorable terms or at all;

·

higher than estimated construction or operating costs, including labor and material costs;

·

inability to complete construction and lease-up on schedule, resulting in increased debt service expense and construction costs; and

·

possible delay in completion of a project because of a number of factors, including weather, labor disruptions, construction delays or delays in receipt of zoning or other regulatory approvals, acts of terror or other acts of violence, or acts of God (such as fires, earthquakes or floods).

Additionally, the time frame required for development and lease-up of these properties means that we may not realize a significant cash return for several years.  If any of the above events occur, the development of the properties may hinder our growth and have an adverse effect on our results of operations and cash flow.  In addition, new development activities, regardless of whether or not they are ultimately successful, typically require substantial time and attention from management.

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Bankruptcy of our developers could impose delays and costs on us with respect to the development retail properties and may adversely affect our financial condition and results of operations.  

The bankruptcy of one of the developers in any of our development joint ventures could materially and adversely affect the relevant property or properties.  If the relevant joint venture through which we have invested in a property has incurred recourse obligations, the discharge in bankruptcy of the developer may require us to honor a completion guarantee and therefore might result in our ultimate liability for a greater portion of those obligations than we would otherwise bear.

A number of properties in our portfolio are subject to ground leases; if we are found to be in breach of a ground lease or are unable to renew a ground lease, we could be materially and adversely affected.

We have 17 properties in our portfolio that are either completely or partially on land subject to ground leases.  Accordingly, we only own a long-term leasehold or similar interest in those properties.  If we are found to be in breach of a ground lease, we could lose the right to use the property. In addition, unless we can purchase a fee interest in the underlying land and improvements or extend the terms of these leases before their expiration, as to which no assurance can be given, we will lose our right to operate these properties and our interest in the improvements upon expiration of the leases.  Assuming that we exercise all available options to extend the terms of our ground leases, all of our ground leases will expire between 2018 and 2105. However, in certain cases, our ability to exercise such options is subject to the condition that we are not in default under the terms of the ground lease at the time th at we exercise such options, and we can provide no assurances that we will be able to exercise our options at such time. Furthermore, we can provide no assurances that we will be able to renew our ground lease upon expiration. If we were to lose the right to use a property due to a breach or non-renewal of the ground lease, we would be unable to derive income from such property and would be required to purchase an interest in another property to attempt to replace that income, which could materially and adversely affect us.

Uninsured losses or losses in excess of insurance coverage could materially and adversely affect our financial condition and results of operations.  

Each tenant is responsible for insuring its goods and premises and, in some circumstances, may be required to reimburse us for a share of the cost of acquiring comprehensive insurance for the property, including casualty, liability, fire and extended coverage customarily obtained for similar properties in amounts which we determine are sufficient to cover reasonably foreseeable losses.  Tenants on a net lease typically are required to pay all insurance costs associated with their space.  However, material losses may occur in excess of insurance proceeds with respect to any property and we may not have sufficient resources to fund such losses.   In addition, we may be subject to certain types of losses, generally of a catastrophic nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, which are either uninsurable or not economically insurable, o r may be insured subject to limitations, such as large deductibles or co-payments.  If we experience a loss that is uninsured or that exceeds policy limits, we could lose all or a significant portion of the capital we have invested in the damaged property, as well as the anticipated future revenue of the property, which could materially and adversely affect our financial condition and results of operations. Inflation, changes in building codes and ordinances, environmental considerations and other factors also might make it impractical or undesirable to use insurance proceeds to replace a property after it has been damaged or destroyed. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged. Furthermore, we may not be able to obtain adequate insurance coverage at reasonable costs in the future, as the costs associated with property a nd casualty renewals may be higher than anticipated.

In addition, insurance risks associated with potential terrorism acts could sharply increase the premium we pay for coverage against property and casualty claims.  Further, mortgage lenders, in some cases, have begun to insist that specific coverage against terrorism be purchased by commercial property owners as a condition for providing mortgage loans.  It is uncertain whether such insurance policies will be available, or available at reasonable costs, which could inhibit our ability to finance or refinance our properties.  In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses.  We cannot assure our shareholders that we will have adequate coverage for such losses and, to the extent we must pay unexpectedly large amounts for insurance, our financial condition, results of operations and ability to make distributio ns to our shareholders could be materially and adversely affected.  

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Some of our properties are subject to potential natural or other disasters, which could cause significant damage to our properties and adversely affect our financial condition and results of operations.  

A number of our properties are located in areas which are susceptible to, and could be significantly affected by, natural disasters that could cause significant damage to our properties. For example, many of our properties are located in coastal regions, and would therefore be affected by any future increases in sea levels or in the frequency or severity of hurricanes and tropical storms, whether such increases are caused by global climate changes or other factors. In addition, a number of our properties are located in California and other regions that are especially susceptible to earthquakes. If we experience a loss, due to such natural disasters or other relevant factors, that is uninsured or which exceeds our policy limits, we could incur significant costs and lose the capital invested in the damaged properties, as well as the anticipated future revenue from those properties, which could a dversely affect our financial condition and results of operations.  In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.

We may incur liability with respect to contaminated property or incur costs to comply with environmental laws, which may negatively impact our financial condition and results of operations.   

Under various federal, state or local laws, ordinances and regulations, as a current or former owner or operator of real property, we may be liable for costs and damages resulting from the presence or release of hazardous substances, waste, or petroleum products at, on, in, under or from such property, including costs for investigation, remediation, natural resource damages or third party liability for personal injury or property damage.  These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the presence or release of such materials, and the liability may be joint and several.  In addition, the presence of contamination or the failure to remediate contamination at our properties may adversely affect our ability to sell, redevelop, or lease such property or to borrow using the property as collateral.  Environmental laws also may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which that property may be used or how businesses may be operated on that property.  Some of our properties have been or may be impacted by contamination arising from current or prior uses of the property or adjacent properties for commercial or industrial purposes. Such contamination may arise from spills of petroleum or hazardous substances or releases from tanks used to store such materials. We also may be liable for the costs of remediating contamination at off-site disposal or treatment facilities when we arrange for disposal or treatment of hazardous substances at such facilities, without regard to whether we comply with enviro nmental laws in doing so.

In addition, our properties are subject to various federal, state and local environmental, health and safety laws, including laws governing the management of wastes and underground and aboveground storage tanks.  Noncompliance with these environmental, health and safety laws could subject us or our tenants to liability. These environmental liabilities could affect a tenant’s ability to make rental payments to us. Moreover, changes in laws could increase the potential costs of compliance with environmental laws, health and safety laws or increase liability for noncompliance.  This may result in significant unanticipated expenditures or may otherwise materially and adversely affect our operations, or those of our tenants, which could in turn have a material adverse effect on us.

As the owner or operator of real property, we may also incur liability based on various building conditions.  For example, buildings and other structures on properties that we currently own or operate or those we acquire or operate in the future contain, may contain, or may have contained, asbestos-containing material, or ACM.  Environmental, health and safety laws require that ACM be properly managed and maintained and may impose fines or penalties on owners, operators or employers for non-compliance with those requirements. These requirements include special precautions, such as removal, abatement or air monitoring, if ACM would be disturbed during maintenance, renovation or demolition of a building, potentially resulting in substantial costs. In addition, we may be subject to liability for personal injury or property damage sustained as a result of exposure to ACM or releases of ACM into the environment.

We cannot assure you that costs or liabilities incurred as a result of environmental issues will not affect our ability to make distributions to our shareholders or that such costs or liabilities will not have a material adverse effect on our financial condition and results of operations.

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Our properties may contain or develop harmful mold or suffer from other indoor air quality issues, which could lead to liability for adverse health effects or property damage or cost for remediation.

When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants. Indoor air quality issues can also stem from inadequate ventilation, chemical contamination from indoor or outdoor sources, and other biological contaminants such as pollen, viruses and bacteria. Indoor exposure to airborne toxins or irritants can be alleged to cause a variety of adverse health effects and symptoms, including allergic or other reactions. As a result, the presence of significant mold or other airborne contaminants at any of our properties could require us to undertake a costly remediation program to contain or remove the mold or other airborne contaminants or to increase ventilation. In addition, the presence of signific ant mold or other airborne contaminants could expose us to liability from our tenants, employees of our tenants, or others if property damage or personal injury occurs.

We may incur significant costs complying with the ADA and similar laws, which could adversely affect our financial condition, results of operations and cash flows.

Under the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. Although we believe the properties in our portfolio substantially comply with present requirements of the ADA, we have not conducted an audit or investigation of all of our properties to determine our compliance. If one or more of the properties in our portfolio is not in compliance with the ADA, we would be required to incur additional costs to bring the property into compliance. Additional federal, state and local laws also may require modifications to our properties, or restrict our ability to renovate our properties. We cannot predict the ultimate cost of compliance with the ADA or other legislation. If we incur substantial costs to comply with the ADA and any other legislation, our financial condition, results of operations, cash flow and our ability to satisfy our debt obligations and to make distribution s to our shareholders could be adversely affected.

We may experience a decline in the fair value of our assets and be forced to recognize impairment charges, which could materially and adversely impact our financial condition, liquidity and results of operations.

A decline in the fair value of our assets may require us to recognize an impairment against such assets under accounting principles generally accepted in the United States (GAAP) if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the amortized cost of such assets. If such a determination were to be made, we would recognize unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be unrecoverable.  Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale.  In addition, there may be significant uncertainty in the valuation, or in the stability of the value, of our properties and those of our unconsolidated joint ventures, that could result in a substantial decrease in the value of our properties and those of our unconsolidated joint ventures.  As a result, we may not be able to recover the carrying amount of our properties and/or our investments in our unconsolidated joint ventures and we may be required to recognize an impairment charge.  For the years ended December 31, 2010, 2009 and 2008, we recognized aggregate impairment losses of $23,057, $82,022 and $463,440, respectively. We may be required to recognize additional asset impairment charges in the future, which could materially and adversely affect our financial condition, liquidity and results of operations.

Our investment in marketable securities has negatively impacted our results of operations and may do so in the future.

Currently, our investment in marketable securities consists of preferred and common stock that are classified as available-for-sale and recorded at fair value. We have recognized other-than-temporary impairments related to our investment in these securities primarily as a result of the severity of the decline in market value and the length of time over which these securities experienced such declines.  For example, other-than-temporary impairments were none, $24,831 and $160,327 for the years ended December 31, 2010, 2009 and 2008, respectively.  As of December 31, 2010, our investment in marketable securities totaled $34,230, which included $22,106 of accumulated unrealized gain.  If our stock positions decline in value, we could take additional other-than-temporary impairments, which could materially and adversely affect our results of operations. In addition, we purchase a portion of our securities through a margin account. If the value of those securities declines and we face a margin call, we may be required to sell those securities at unfavorable times and

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record a loss or to post additional cash as collateral, which could adversely affect our financial condition, results and operations and our ability to satisfy our debt obligations and make distributions to our shareholders. 

Further, we may continue to invest in marketable securities in the future.  Investments in marketable securities are subject to specific risks relating to the particular issuer of the securities, including the financial condition and business outlook of the issuer, which may result in significant losses to us. Marketable securities are generally unsecured and may also be subordinated to other obligations of the issuer.  As a result, investments in marketable securities are subject to risks of: (i) limited liquidity in the secondary trading market; (ii) substantial market price volatility resulting from changes in prevailing interest rates; (iii) subordination to the prior claims of banks and other senior lenders to the issuer; (iv) the possibility that earnings of the issuer may be insufficient to meet its debt service and distribution obligations; and (v) the declining creditworthiness and potential for insolvency of the issuer during periods of rising interest rates and economic downturn.  These risks may adversely affect the value of outstanding marketable securities and the ability of the issuer to make distribution payments.

Our success depends on key personnel whose continued service is not guaranteed.

We depend on the efforts and expertise of our senior management team to manage our day-to-day operations and strategic business direction.  We do not, however, have employment agreements with the members of our senior management team.  Therefore, we cannot guarantee their continued service.  Moreover, among other things, it would constitute an event of default under the credit agreement governing our senior secured revolving line of credit and secured term loan if certain members of management (or a reasonably satisfactory replacement) ceased to continue to be active on a daily basis in our management.  The loss of their services, and our inability to find suitable replacements, could have an adverse effect on our operations.

RISKS RELATED TO OUR DEBT FINANCING

We had approximately $3,757,237 of consolidated indebtedness outstanding as of December 31, 2010, which could adversely affect our financial health and operating flexibility.  

We have a substantial amount of indebtedness.  As of December 31, 2010, we had approximately $3,757,237 of aggregate consolidated indebtedness outstanding, substantially all of which was secured by one or more of our properties or our equity interests in our joint ventures. As a result of this substantial indebtedness, we are required to use a material portion of our cash flow to service principal and interest on our debt, which will limit the cash flow available to pursue desirable business opportunities, pay operating expenses and make distributions to our shareholders.

Our substantial indebtedness could have important consequences to us and the value of our stock, including:

·

limiting our ability to borrow additional amounts for working capital, capital expenditures, debt service requirements, execution of our growth strategy or other purposes;

·

limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service the debt;

·

increasing our vulnerability to general adverse economic and industry conditions, including increases in interest rates;

·

limiting our ability to capitalize on business opportunities, including the acquisition of additional properties, and to react to competitive pressures and adverse changes in government regulation;

·

limiting our ability or increasing the costs to refinance indebtedness;

·

limiting our ability to enter into marketing and hedging transactions by reducing the number of counterparties with whom we can enter into such transactions as well as the volume of those transactions;

·

we may be forced to dispose of one or more properties, possibly on disadvantageous terms;

·

we may be forced to sell additional equity securities at prices that may be dilutive to existing shareholders;

·

we may default on our obligations or violate restrictive covenants, in which case the lenders or mortgagees may accelerate our debt obligations, foreclose on the properties that secure their loans and/or take control of our properties that secure their loans and collect rents and other property income;

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·

in the event of a default under any of our recourse indebtedness, we would be liable for any deficiency between the value of the property securing such loan and the principal and accrued interest on the loan;

·

we may violate restrictive covenants in our loan documents, which would entitle the lenders to accelerate our debt obligations; and

·

our default under any one of our mortgage loans with cross-default provisions could result in a default on other indebtedness.

If any one of these events were to occur, our financial condition, results of operations, cash flow and our ability to satisfy our principal and interest obligations and to make distributions to our shareholders could be materially and adversely affected.

Our financial condition and ability to make distributions to our shareholders could be adversely affected by financial and other covenants and other provisions under the credit agreement governing our senior secured revolving line of credit and secured term loan or other debt agreements.

On February 4, 2011, we amended and restated our existing credit agreement to provide for a senior secured credit facility in the aggregate amount of $585,000, consisting of a $435,000 senior secured revolving line of credit and a $150,000 secured term loan with a number of financial institutions. The credit agreement governing this senior secured revolving line of credit and secured term loan requires compliance with certain financial and operating covenants, including, among other things, leverage ratios, certain coverage ratios and net worth covenants, a covenant regarding minimum occupancy, limitations on our ability to incur unhedged variable rate debt or recourse indebtedness, limitations on our investments in unimproved land, unconsolidated joint ventures, construction in progress and mortgage notes receivable. The credit agreement also requires us to obtain consent prior to selling assets above a certain value or increasi ng our total assets by more than a certain amount as a result of a merger. In addition, our senior secured revolving line of credit and secured term loan limit our distributions to the greater of 95% of funds from operations, or FFO, or the amount necessary for us to maintain our qualification as a REIT. The senior secured revolving line of credit and secured term loan also contain customary events of default, including but not limited to, non-payment of principal, interest fees or other amounts, breaches of covenants, defaults on any recourse indebtedness of Inland Western Retail Real Estate Trust, Inc. in excess of $20,000 or any non-recourse indebtedness in excess of $100,000 in the aggregate subject to certain carveouts, failure of certain members of management (or a reasonably satisfactory replacement) to continue to be active on a daily basis in our management and bankruptcy or other insolvency events. These provisions could limit our ability to make distributions to our shareholders, obtain additional funds needed to address cash shortfalls or pursue growth opportunities or transactions that would provide substantial returns to our shareholders. In addition, a breach of these covenants or other event of default would allow the lenders to accelerate payment of advances under the credit agreement. If payment is accelerated, our assets may not be sufficient to repay such debt in full and, as a result, such an event may have a material adverse effect on our financial condition.

In addition, and in connection with the debt refinancing transaction of IW JV, we entered into a lockbox and cash management agreement pursuant to which substantially all the income generated by the IW JV properties will be deposited directly into a lockbox account established by the lender. In the event of a default or the debt service coverage ratio falling below a set amount, the cash management agreement provides that excess cash flow will be swept into a cash management account, for the benefit of the lender, to be held as additional security after the payment of interest and approved property operating expenses. Cash will not be distributed to us from these accounts until the earlier of a cash sweep event cure, or the repayment of the mortgage loan, senior mezzanine note and junior mezzanine note. As of December 31, 2010, we were in compliance with the terms of the cash management agreement, however, if an event of default were to occur, we may be forced to borrow funds in order to make distributions to our shareholders and maintain our qualification as a REIT.

Given the restrictions in our debt covenants on these and other activities, we may be significantly limited in our operating and financial flexibility and may be limited in our ability to respond to changes in our business or competitive activities in the future.

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We incur mortgage indebtedness and other borrowings, which reduce the funds available for distributions required to maintain our status as a REIT and to avoid income and excise tax.

We historically have incurred mortgage indebtedness and other borrowings in order to finance acquisitions or ongoing operations and we intend to continue to do so in the future. Our debt service and repayment requirements will not be reduced regardless of our actual cash flows. In addition, in order to maintain our qualification as a REIT, we must distribute to our shareholders at least 90% of our annual REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, and we are generally subject to corporate tax on any retained income.  As a result, if our future cash flow is not sufficient to meet our debt service and repayment requirements and the REIT distribution requirements, we may be required to use cash reserves, incur additional debt, sell equity securities or liquidate assets in order to meet those requirements. However, we cannot assure you that capital will be ava ilable from such sources on favorable terms or at all, which may negatively impact our financial condition, results of operations and ability to make distributions to our shareholders.

Substantially all of the mortgage indebtedness we incur is secured, which increases our risk of loss since defaults may result in foreclosure. In addition, mortgages sometimes include cross-collateralization or cross-default provisions that increase the risk that more than one property may be affected by a default.  

As of December 31, 2010, we had a total of $3,521,552, net of premiums of $17,534 and discounts of $2,502, of indebtedness secured by 276 of our 284 operating properties.  Because substantially all of our properties are mortgaged to secure payments of indebtedness, we are subject to the risk of property loss since defaults on indebtedness secured by properties may result in foreclosure actions initiated by lenders and ultimately our loss of the property securing the loan for which we are in default.  

For example, as of the date of this filing, we were in default on $76,057 of mortgage loans secured by a total of seven properties with 680,929 square feet of GLA representing $4,721 of ABR as of December 31, 2010.  We expect to repay a $21,715 mortgage loan with borrowings under our senior secured revolving line of credit in March 2011.  We are currently in active negotiations with the lenders regarding an appropriate course of action, including the potential for a discounted payoff with respect to the remaining $54,342 of mortgages payable.  We can provide no assurance that we will be able to restructure our current obligations under the mortgage loans that were in default or that our negotiations with the lenders will result in favorable outcomes to us.  Failure to restructure our mortgage obligations could result in default and foreclosure actions and loss of the underlying properties.  In the event t hat we default on other mortgages in the future, either as a result of ceasing to make debt service payments or the failure to meet applicable covenants, we may have additional properties that are subject to potential foreclosure.  In addition, as a result of cross-collateralization or cross-default provisions contained in certain of our mortgage loans, a default under one mortgage loan could result in a default on other indebtedness and cause us to lose other better performing properties, which could materially and adversely affect our financial condition and results of operations.

Further, for tax purposes, a foreclosure of any nonrecourse mortgage on any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage.  If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on the foreclosure without accompanying cash proceeds, a circumstance which could hinder our ability to meet the REIT distribution requirements imposed by the Code.  As a result, we may be required to identify and utilize other sources of cash for distributions to our shareholders of that income.

Dislocations in the credit markets, including the continuing effects of the severe dislocation experienced in 2008 and 2009, may adversely affect our ability to obtain debt financing at favorable rates or at all.

Dislocations in the credit markets, generally or relating to the real estate industry specifically, may adversely affect our ability to obtain debt financing at favorable rates or at all.  The credit markets experienced a severe dislocation during 2008 and 2009, which, for certain periods of time, resulted in the near unavailability of debt financing for even the most creditworthy borrowers.  Although the credit markets have recovered from this severe dislocation, there are a number of continuing effects, including a weakening of many traditional sources of debt financing, a reduction in the overall amount of debt financing available, lower loan to value ratios, a tightening of lender underwriting standards and terms and higher interest rate spreads.  As a result, we may not be able to refinance our existing debt when it comes due or to obtain new debt financing for acquisitions or development projects, or we may be forced to accept less favorable terms, including

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increased collateral to secure our indebtedness, higher interest rates and/or more restrictive covenants.  If we are not successful in refinancing our debt when it becomes due, we may default under our loan obligations, enter into foreclosure proceedings, or be forced to dispose of properties on disadvantageous terms, any of which might adversely affect our ability to service other debt and to meet our other obligations.  In addition, if a dislocation similar to that which occurred in 2008 and 2009 occurs in the future, the values of our properties may decline further, which could limit our ability to obtain future debt financing, refinance existing debt or utilize existing debt commitments and thus materially and adversely affect on our financial condition, particularly if it occurs at a time when we have significant debt maturities coming due.

Future increases in interest rates may adversely affect any future refinancing of our debt, may require us to sell properties and could adversely affect our ability to make distributions to our shareholders.

If we incur debt in the future and do not have sufficient funds to repay such debt at maturity, it may be necessary to refinance the debt through additional debt or additional equity financings.  If, at the time of any refinancing, prevailing interest rates or other factors result in higher interest rates on refinancings, our net income could be reduced and any increases in interest expense could adversely affect our cash flows. Consequently, our cash available for distribution to our shareholders would be reduced and we may be prevented from borrowing more money. Any such future increases in interest rates would result in higher interest rates on new debt and our existing variable rate debt and may adversely impact our financial condition.

Further, if we are unable to refinance our debt on acceptable terms, we may be forced to dispose of properties on disadvantageous terms, potentially resulting in losses.  We may place mortgages on properties that we acquire to secure a revolving line of credit or other debt.  To the extent we cannot meet future debt service obligations, we will risk losing some or all of our properties that may be pledged to secure our obligations. Also, covenants applicable to any future debt could impair our planned investment strategy, and, if violated, result in default.

RISKS RELATED TO OUR ORGANIZATIONAL STRUCTURE

Our board of directors may change significant corporate policies without shareholder approval.

Our investment, financing, borrowing and distribution policies and our policies with respect to all other activities, including growth, debt, capitalization and operations, are determined by our board of directors.  These policies may be amended or revised at any time and from time to time at the discretion of the board of directors without a vote of our shareholders.  As a result, the ability of our shareholders to control our policies and practices is extremely limited.  We could make investments and engage in business activities that are different from, and possibly riskier than, the investments and businesses described in this report.  In addition, our board of directors may change our policies with respect to conflicts of interest provided that such changes are consistent with applicable legal and regulatory requirements.  A change in these policie s could have an adverse effect on our financial condition, results of operations, cash flows and ability to satisfy our debt service obligations and to make distributions to our shareholders.

We could increase the number of authorized shares of stock and issue stock without shareholder approval.

Subject to applicable legal and regulatory requirements, our charter authorizes our board of directors, without shareholder approval, to increase the aggregate number of authorized shares of stock or the number of authorized shares of stock of any class or series, to authorize us to issue authorized but unissued shares of our common stock or preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock and to set the preferences, rights and other terms of such classified or unclassified shares. As a result, we may issue series or classes of common stock or preferred stock with preferences, dividends, powers and rights, voting or otherwise, that are senior to, or otherwise conflict with, the rights of holders of our common stock. In addition, our board of directors could establish a series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transa ction or a change of control that might involve a premium price for our common stock or that our shareholders may believe is in their best interests.

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Provisions of our charter may limit the ability of a third party to acquire control of our company.

Our charter provides that no person may beneficially own more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock or 9.8% in value of the aggregate outstanding shares of our capital stock.  These ownership limitations may prevent an acquisition of control of our company by a third party without our board of directors’ approval, even if our shareholders believe the change in control is in their best interests.

Certain provisions of Maryland law could inhibit changes in control of us, which could lower the value of our common stock.

Certain provisions of the Maryland General Corporation Law, or MGCL, may have the effect of inhibiting or deterring a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium on their shares of common stock, including:

  •

“business combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of our then outstanding voting shares) or an affiliate of an interested shareholder for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter may impose special shareholder voting requirements unless certain minimum price conditions are satisfied; and

 •

“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of outstanding “control shares”) have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.

Title 3, Subtitle 8 of the MGCL permits our board of directors, without shareholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain takeover defenses, including adopting a classified board. Such takeover defenses may have the effect of inhibiting a third party from making an acquisition proposal for us or of delaying, deferring or preventing a change in control of us under the circumstances that otherwise could provide our common shareholders with the opportunity to realize a premium over the then current market price.

In addition, the advance notice provisions of our bylaws could delay, defer or prevent a transaction or a change of control of our company that might involve a premium price for holders of our common stock or that our shareholders may believe to be in their best interests.

Our rights and the rights of our shareholders to take action against our directors and officers are limited, which could limit your recourse in the event of actions that you do not believe are in your best interests.

Maryland law provides that a director or officer has no liability in that capacity if he or she satisfies his or her duties to us and our shareholders. As permitted by the MGCL, our charter limits the liability of our directors and officers to us and our shareholders for money damages, except for liability resulting from:

•

actual receipt of an improper benefit or profit in money, property or services; or

•

a final judgment based upon a finding of active and deliberate dishonesty by the director or officer  that was material to the cause of action adjudicated.

In addition, our charter and bylaws and indemnification agreements that we have entered into with our directors and certain of our officers require us, to indemnify our directors and officers, among others, for actions taken by them in those capacities to the maximum extent permitted by Maryland law. As a result, we and our shareholders may have more limited rights against our directors and officers than might otherwise exist. Accordingly, in the event that actions taken in good faith by any of our directors or officers impede the performance of our company, your ability to recover damages from such director or officer will be limited. In addition, we will be obligated to advance the defense costs incurred by our

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directors and our officers with indemnification agreements, and may, in the discretion of our board of directors, advance the defense costs incurred by our employees and other agents, in connection with legal proceedings.

RISKS RELATING TO OUR REIT STATUS

Failure to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our shareholders and materially and adversely affect our financial condition and results of operations.

Subject to the discussion below regarding the closing agreement that we have requested from the IRS, we believe that we have been organized, owned and operated in conformity with the requirements for qualification and taxation as a REIT under the Code beginning with our taxable year ended December 31, 2003, and that our intended manner of ownership and operation will enable us to continue to meet the requirements for qualification and taxation as a REIT for federal income tax purposes. However, we cannot assure you that we have qualified or will qualify as such. Shareholders should be aware that qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. Future legislation, new regulat ions, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT or the federal income tax consequences of such qualification.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our shareholders because:

·

we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates;

·

we could be subject to the U.S. federal alternative minimum tax;

·

we could be subject to increased state and local taxes; and

·

unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will not be required to make distributions and it could result in default under certain of our indebtedness agreements. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our stock.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.

Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, taxes on net income from certain “prohibited transactions,” tax on income from certain activities conducted as a result of a foreclosure, and state or local income, franchise, property and transfer taxes.  In addition, we could, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT.  Also, our subsidiaries that are TRSs will be subject to regular corporate U.S. federal, state and local taxes.  To the extent that we conduct operations outside of the United States, our operations would subject us to applicable foreign taxes as wel l. Any of these taxes would decrease our earnings and our cash available for distributions to shareholders.

Failure to make required distributions would subject us to U.S. federal corporate income tax.

In order to qualify as a REIT, we generally are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding net capital gains, each year to our shareholders.  To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income.  In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders for a calendar year is less than a minimum amount specified under the Code.  Moreover, our senior secured revolving line of credit and secured term loan may limit our distributions to the minimum amount required to maintain REIT status.  Specifically, they limit our distributions to the greater of 95% of FFO or the a mount necessary for us to maintain our qualification as a REIT.  To the extent these limits prevent us from distributing 100% of our REIT taxable income, we will be subject to income tax, and potentially excise tax, on the retained amounts.

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We may be required to borrow funds to satisfy our REIT distribution requirements.

In order to maintain our qualification as a REIT and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales. Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for U.S. federal income tax purposes, or the effect of non-deductible expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code denies a deduction, the creation of reserves or required debt service or amortization payments. The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or to sell equity securities in order to fund distributions required to maintain our qualification as a REIT. Also, although the IRS has issued Revenue Procedure 2010-12 treating certain issuances of taxable stock dividends by REITs as distributions for purposes of the REIT requirements for taxable years ending on or before December 31, 2011, no assurance can be given that the IRS will extend this treatment or that we will otherwise be able to pay taxable stock dividends to meet our REIT distribution requirements.

Dividends payable by REITs generally do not qualify for reduced tax rates.

Certain dividends payable to individuals, trusts and estates that are U.S. shareholders are currently subject to U.S. federal income tax at a maximum rate of 15% and are scheduled to be taxed at ordinary income rates for taxable years beginning after December 31, 2012. Dividends payable by REITs, however, are generally not eligible for the current reduced rates. The more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or to liquidate otherwise attractive investments.

To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make and refrain from engaging in certain activities.  Thus, compliance with the REIT requirements may hinder our performance.

In addition, if we fail to comply with certain asset ownership tests at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our shareholders.

We may be subject to adverse legislative or regulatory tax changes that could negatively impact our financial condition.

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict if or when any new U.S. federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our shareholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation or administrative interpretation.

You may be restricted from acquiring or transferring certain amounts of our stock.

In order to maintain our REIT qualification, among other requirements, no more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals, as defined in the Code to include certain kinds of entities, during the last half of any taxable year, other than the first year for which we made a REIT election.  To assist us in qualifying as a REIT, our charter contains an aggregate stock ownership limit of 9.8% and a common stock ownership limit of 9.8%.  Generally, any shares of our stock owned by affiliated owners will be added together for purposes of the aggregate stock ownership limit, and any shares of common stock owned by affiliated owners will be added together for purposes of the common stock ownership limit.

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If anyone attempts to transfer or own shares of stock in a way that would violate the aggregate stock ownership limit or the common stock ownership limit, unless such ownership limits have been waived by our board of directors, or in a way that would prevent us from continuing to qualify as a REIT, those shares instead will be transferred to a trust for the benefit of a charitable beneficiary and will be either redeemed by us or sold to a person whose ownership of the shares will not violate the aggregate stock ownership limit or the common stock ownership limit. If this transfer to a trust fails to prevent such a violation or our disqualification as a REIT, then the initial intended transfer or ownership will be null and void from the outset.  Anyone who acquires or owns shares of stock in violation of the aggregate stock ownership limit or the common stock ownership limit, unless such own ership limit or limits have been waived by our board of directors, or in violation of the other restrictions on transfer or ownership in our charter bears the risk of a financial loss when the shares of stock are redeemed or sold if the market price of our stock falls between the date of purchase and the date of redemption or sale.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

The REIT provisions of the Code limit our ability to hedge our liabilities. Generally, income from a hedging transaction we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as non-qualifying income for purposes of both gross income tests. As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on income or gains resulting from hedges entered into by it or expose us to greater risks associated with changes in interest rat es than we would otherwise want to bear. In addition, losses in any of our TRSs will generally not provide any tax benefit, except for being carried forward for use against future taxable income in the TRSs.

The ability of our board of directors to revoke our REIT qualification without shareholder approval may cause adverse consequences to our shareholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, without the approval of our shareholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to shareholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on our total return to our shareholders.

We have requested a closing agreement with the IRS with respect to the administration of our distribution reinvestment plan prior to May 2006 and we may incur an expense even if the IRS grants our request.

In order to satisfy the REIT distribution requirements, the dividends we pay must not be “preferential” within the meaning of the Code. A dividend determined to be preferential will not qualify for the dividends paid deduction.  To avoid paying preferential dividends, we must treat every shareholder of a class of stock with respect to which we make a distribution the same as every other shareholder of that class, and we must not treat any class of stock other than according to its dividend rights as a class.

We have maintained a distribution reinvestment plan, or DRP, since we began making distributions.  Certain aspects of the operation of our DRP prior to May 2006 may have violated the prohibition against preferential dividends, and to address those issues we have requested a closing agreement from the IRS. From November 2003 through April 2006, we calculated distributions to our shareholders using a daily record and declaration date. The distributions so calculated for a given month were paid on the tenth day of the following month. However, for purposes of determining the amount of distributions to be paid in the following month, shares issued under the DRP prior to May 2006 were treated as issued on the first day of the month, rather than the tenth day of the month when cash dividends were paid. The administration of our DRP in such manner could be viewed as giving rise to preferential dividends, and thus the IRS could determin e that our dividends paid from November 2003 through April 2006 did not qualify for the dividends paid deduction. If none of the dividends that we paid prior to May 2006 qualified for the dividends paid deduction, we would not have qualified as a REIT beginning in the tax year 2004, and we could be prohibited from reelecting REIT status until 2009. On January 20, 2011, we submitted a request to the IRS for a closing agreement whereby the IRS would agree that our dividends paid deduction for taxable years 2004 through 2006, the years for which we had positive taxable income, was sufficient for us to qualify for taxation as a REIT and would eliminate our REIT taxable income for such years, notwithstanding the

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administration of our DRP in the manner described above.  The IRS is currently reviewing our request and continues to move it through its review process.  If the IRS does not enter into a closing agreement, we could incur a tax related liability, representing a payment of corporate taxes due for past periods including interest and penalties for the open statutory tax years we would not have qualified as a REIT.

While there can be no assurance that the IRS will enter into a closing agreement with us, based upon the IRS entering into closing agreements with other REITs, we expect to obtain a closing agreement with the IRS for an estimated cost plus interest of approximately $62. We estimate that the range of loss that is reasonably possible is from approximately $62 if we obtain the closing agreement to approximately $155,000 if we do not obtain the closing agreement. We believe that it is probable that we will enter into a closing agreement with the IRS and, as a result, we have recorded an expense of $62 during the year ended December 31, 2010.

GENERAL INVESTMENT RISKS

The annual statement of value for shareholders subject to Employee Retirement Income Security Act (ERISA) and to certain other plan shareholders is only an estimate and may not reflect the actual value of our shares.

The annual statement of estimated value for shareholders subject to ERISA and to certain other plan shareholders is only an estimate and may not reflect the actual value of our shares. The annual statement of estimated value is based on the estimated value of each share of common stock based as of the close of our fiscal year. The board of directors, in part, utilized third party sources and advice in estimating value, which reflects, among other things, the impact of the adverse trends in the economy and the real estate industry. Because this is only an estimate, we may subsequently revise any annual valuation that is provided. We cannot assure that:

·

this estimate of value could actually be realized by us or by our shareholders upon liquidation;

·

shareholders could realize this estimate of value if they were to attempt to sell their shares of common stock now or in the future;

·

this estimate of value reflects the price or prices at which our common stock would or could trade if it were listed on a national stock exchange or included for quotation on a national market system; or

·

the annual statement of value complies with any reporting and disclosure or annual valuation requirements under ERISA or other applicable law.

As of December 31, 2009, the value for our shares was estimated for ERISA purposes to be $6.85 per share.  As we currently intend to pursue the initial listing of our existing common stock on a national securities exchange within the next 12 months, we are not planning to publish an estimated annual statement of value of our common stock as of December 31, 2010.

Our common stock is not currently listed on an exchange and cannot be readily sold.

There is currently no public trading market for our shares of common stock and we cannot assure our shareholders that one will develop. We may never list the shares for trading on a national stock exchange. The absence of an active public market for our shares could impair a shareholder’s ability to sell our shares or obtain an active trading market valuation of the value of their interest in us.

Our share repurchase program is limited thereby reducing the potential liquidity of a shareholders’ investment.

Our board of directors suspended our share repurchase program effective November 19, 2008.  If reinstated, under our share repurchase program, a maximum of 5% of the weighted average number of shares of our common stock outstanding during the prior calendar year may be repurchased by us. This limits the number of shares we could purchase. If reinstated and we subsequently terminate or modify our share repurchase program or if we do not have sufficient funds available to repurchase all shares that our shareholders request to repurchase, then our shareholders’ ability to liquidate their shares will be further diminished.

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Item 1B.  Unresolved Staff Comments

None.

Item 2. Properties

The following table sets forth summary information regarding our consolidated operating portfolio at December 31, 2010 (GLA and dollars (other than per square foot information) in thousands).  For further details, see “Real Estate and Accumulated Depreciation (Schedule III)” herein.

Geographic Area	Number of Properties	GLA	Percent of Total GLA (a)	Percent Leased (b)		ABR	Percent of Total ABR (a)		ABR Per Leased Sq. Ft. (c)
Northeast
Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, Vermont	70	8,352	23.3%	92.1%	$	111,018	25.6%	$	14.43
Texas
Texas	49	7,565	21.2%	85.8%		99,049	22.9%		15.27
West
Arizona, California, Colorado, Montana, Nevada, New Mexico, Utah, Washington	49	7,293	20.4%	75.2%		80,791	18.7%		14.74
Southeast
Alabama, Florida, Georgia, Kentucky, North Carolina, South Carolina, Tennessee, Virginia	60	7,068	19.8%	92.4%		79,910	18.5%		12.24
Midwest
Arkansas, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Minnesota, Missouri, Ohio, Oklahoma, Wisconsin	38	5,488	15.3%	88.4%		62,003	14.3%		12.78
Total - Retail (d)	266	35,766	100.0%	86.8%	$	432,771	100.0%	$	13.94
Office	12	3,335		96.5%		38,944			12.10
Industrial	6	3,390		100.0%		12,966			3.82
Total Consolidated Operating Portfolio	284	42,491		88.6%	$	484,681		$	12.87
(a) Percentages are only provided for our retail operating portfolio.
(b) Based on leases commenced as of December 31, 2010 and calculated as leased GLA divided by total GLA.  As of December 31, 2010, the consolidated operating portfolio was 90.2% leased, including leases signed, but not commenced.
(c) Represents ABR divided by leased GLA.
(d) Includes (i) 55 properties consisting of 6,542 of GLA and representing $84,882 of ABR held in one joint venture in which we have a 77% interest and (ii) a portion of one property consisting of 311 of GLA and representing $6,692 of ABR held in one joint venture in which we have a 95% interest.

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The following sets forth information regarding the 20 largest tenants in our retail operating portfolio, based on ABR, as of December 31, 2010 (GLA and dollars, other than per square foot information, in thousands).

Tenant (a)	Number of Stores	Leased GLA	Percent of Leased GLA (b)		ABR	Percent of Total ABR (c)		ABR per Leased GLA (d)	Type of Business
Best Buy	26	1,022	3.3%	$	13,879	3.2%	$	13.59	Electronics
TJX Companies (e)	37	1,120	3.6%		10,323	2.4%		9.22	Discount Clothing
Rite Aid Store	34	421	1.4%		10,320	2.4%		24.51	Drug Store
Stop & Shop	10	479	1.5%		10,007	2.3%		20.90	Grocery
Bed Bath & Beyond, Inc. (f)	26	710	2.3%		9,109	2.1%		12.82	Home Goods
Home Depot	9	1,097	3.5%		9,102	2.1%		8.30	Home Improvement
Ross Dress for Less	32	955	3.1%		8,796	2.0%		9.21	Discount Clothing
PetSmart (g)	30	643	2.1%		8,552	2.0%		13.30	Pet Supplies
The Sports Authority	17	724	2.3%		8,423	1.9%		11.64	Sporting Goods
Kohl's Corporation	15	1,178	3.8%		7,979	1.8%		6.78	Discount Department Store
Wal-Mart Stores, Inc. (h)	6	1,045	3.4%		6,779	1.6%		6.49	Discount Department Store
Publix	16	635	2.0%		6,723	1.6%		10.58	Grocery
Edwards	2	219	0.7%		6,558	1.5%		29.92	Theatre
Office Depot	36	370	1.2%		5,866	1.4%		15.87	Office Supplies
Pier 1 Imports	21	437	1.4%		5,864	1.4%		13.43	Home Goods
Michaels	23	530	1.7%		5,648	1.3%		10.66	Arts & Crafts
Dick's Sporting Goods	9	465	1.5%		5,436	1.3%		11.70	Sporting Goods
Gap Inc. (i)	26	383	1.2%		5,005	1.2%		13.08	Clothing
The Kroger Co. (j)	14	551	1.8%		4,799	1.1%		8.71	Grocery
CVS	15	185	0.6%		4,756	1.1%		25.72	Drug Store
	404	13,169	42.4%	$	153,924	35.7%	$	11.69
(a) Excludes 2 office tenants, Hewitt Associates LLC consisting of 1,162 of GLA and $15,106 of ABR and Zurich American Insurance Company, consisting of 895 of GLA and $10,476 of ABR.
(b) Represents the percentage of total leased GLA of our consolidated retail operating properties.
(c) Represents the percentage of total annualized base rent from our consolidated retail operating properties.
(d) Represents annualized base rent divided by leased GLA.
(e) Includes TJ Maxx (17 locations), Marshalls (16 locations), HomeGoods (three locations) and A.J. Wright (one location).
(f) Includes Bed Bath & Beyond (25 locations) and the Christmas Tree Shops (one location).
(g) We also lease a one million square foot distribution center to PetSmart with annualized base rent of $3,400.
(h) Includes Wal-Mart (five locations) and Sam's Club (one location).
(i) Includes Old Navy (17 locations), The Gap (five locations) and Banana Republic (four locations).
(j) Includes Kroger (11 locations), Food 4 Less (one location), King Soopers Grocery Store (one location) and King Soopers Fuel Site (one location).

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The following table sets forth a summary, as of December 31, 2010, of lease expirations schedule to occur during each of the ten calendar years from 2011 to 2020 and thereafter, assuming no exercise of renewal options or early termination rights.  The following table is based on leases commenced as of December 31, 2010 for our retail operating portfolio.  Dollars (other than per square foot information) and square feet of GLA are presented in thousands in the table.

Lease Expiration Year	Number of Expiring Leases	GLA	Percent of Leased GLA		ABR	Percent of Total ABR		ABR per Leased Sq. Ft. (a)
2011 (b)	373	1,515	4.9%	$	24,774	5.7%	$	16.35
2012	548	2,114	6.8%		36,593	8.5%		17.31
2013	548	2,904	9.4%		45,541	10.5%		15.68
2014	589	3,997	12.9%		60,493	14.0%		15.13
2015	413	3,301	10.6%		46,065	10.6%		13.95
2016	239	2,167	7.0%		31,732	7.3%		14.64
2017	111	1,567	5.0%		19,543	4.5%		12.47
2018	86	1,050	3.4%		16,502	3.8%		15.72
2019	90	1,892	6.1%		25,142	5.8%		13.29
2020	95	2,022	6.5%		23,871	5.5%		11.81
Thereafter	233	8,171	26.3%		97,916	22.6%		11.98
Month to month	73	343	1.1%		4,599	1.2%		13.41
Leased Total	3,398	31,043	100.0%	$	432,771	100.0%	$	13.94
(a) Represents ABR divided by leased GLA.
(b) Excludes month to month leases.

As of December 31, 2010, the weighted average lease term of leases at our office and industrial properties, based on ABR, was 6.8 years, with no expirations prior to 2014.

Item 3.  Legal Proceedings  

We previously disclosed in our Form 10-K, as amended, for the fiscal years ended December 31, 2009, 2008 and 2007, respectively, the lawsuit filed against us and 19 other defendants by City of St. Clair Shores General Employees Retirement System and Madison Investment Trust in the United States District Court for the Northern District of Illinois (the “Court”).  We previously disclosed in our Form 8-K filed on July 20, 2010, that on July 14, 2010, the lawsuit was settled by us and all other defendants (the “Settlement”), subject to preliminary and final approval by the Court and neither we nor Daniel L. Goodwin (who beneficially owned more than 5% of our stock as of December 31, 2010 and 2009) exercising a right to terminate the Settlement if class members holding more than an agreed-upon percentage of shares elected to opt out of the Settlement.  Following notice of the Sett lement to the class members, seven class members elected to opt out of the Settlement. The right to terminate the Settlement was not triggered based on the number of shares held by these seven class members. On November 8, 2010, the Court granted final approval of the Settlement.  

Pursuant to the terms of the Settlement, 9,000 shares of our common stock were transferred back to us from shares of common stock issued to the owners (the “Owners”) of certain entities that were acquired by us in our internalization transaction.  This share transfer was recorded as a capital transaction in the fourth quarter of 2010.  Pursuant to the Settlement, we paid the fees and expenses of counsel for class plaintiffs in the amount of $10,000, as awarded by the Court on November 8, 2010.  We were reimbursed $1,994 by our insurance carrier for a portion of such fees and expenses.  The Owners (who include Daniel L. Goodwin and certain of our directors and executive officers) also agreed to provide a limited indemnification to certain defendants who are our directors and an officer if any class members opted out of the Settlement and brought claims against them.  To our knowledge, none o f the seven class members who opted out of the Settlement have filed claims against us or our directors and officers.    

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Item 4.  (Removed and Reserved)

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

There is no established public trading market for our shares of common stock.  In order for qualified plans to report account values as required by ERISA, we have historically provided an estimated share value on an annual basis. As of December 31, 2009, the annual statement of value for shareholders subject to ERISA was estimated to be $6.85 per share.  As we currently intend to pursue the initial listing of our existing common stock on a national securities exchange within the next 12 months, we are not planning to publish an estimated annual statement of value of our common stock as of December 31, 2010.

Under the DRP, a shareholder may acquire, from time to time, additional shares of our stock by reinvesting cash distributions payable by us to such shareholder, without incurring any brokerage commission, fees or service charges.  Thus, since March 1, 2010, additional shares of our stock purchased under the DRP have been purchased at a price of $6.85 per share.

Shareholders

As of December 31, 2010, we had 111,263 shareholders of record.

Distributions

We intend to continue to qualify as a REIT for U.S. federal income tax purposes. The Code generally requires that a REIT distribute annually at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain, and imposes tax on any taxable income retained by a REIT, including capital gains.  

To satisfy the requirements for qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we intend to make regular quarterly distributions of all or substantially all of our REIT taxable income to holders of our common stock out of assets legally available for such purposes. Our future distributions will be at the sole discretion of our board of directors. When determining the amount of future distributions, we expect that our board of directors will consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future cash flows, (iii) our determination of near-term cash needs for debt repayments, existing or future share repurchases, and selective acquisitions of new properties, (iv) the timing of significant re-leasing activities and the establishment of additional cash reserves for anticipated tenant improvements and general property c apital improvements, (v) our ability to continue to access additional sources of capital, (vi) the amount required to be distributed to maintain our status as a REIT and to reduce any income and excise taxes that we otherwise would be required to pay and (vii) any limitations on our distributions contained in our credit or other agreements, including, without limitation, in our senior secured revolving line of credit and secured term loan, which limit our distributions to the greater of 95% of FFO or the amount necessary for us to maintain our qualification as a REIT.

If our operations do not generate sufficient cash flow to allow us to satisfy the REIT distribution requirements, we may be required to fund distributions from working capital, borrow funds, sell assets or reduce such distributions. Our distribution policy enables us to review the alternative funding sources available to us from time to time. Our actual results of operations will be affected by a number of factors, including the revenues we receive from our properties, our operating expenses, interest expense, the ability of our tenants to meet their obligations and unanticipated expenditures. For more information regarding risk factors that could materially adversely affect our actual results of operations, please see Item 1A. “Risk Factors”.

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The table below sets forth the quarterly dividend distributions per common share for the years ended December 31, 2010 and 2009:

		2010		2009
First quarter	$	0.04375	$	0.0488
Second quarter		0.04625		0.05
Third quarter		0.05		0.025
Fourth quarter		0.05625		0.0325
Total	$	0.19625	$	0.1563

The following table compares cash flows provided by operating activities to distributions declared for years ended December 31, 2010 and 2009:

		2010		2009
Cash flows provided by operating activities	$	184,072	$	249,837
Distributions declared		94,579		75,040
Excess	$	89,493	$	174,797

For each of these periods, our cash flows provided by operating activities exceeded the amount of our distributions declared.

Equity Compensation Plan Information

We have adopted an Amended and Restated Independent Director Stock Option Plan, or the Plan, which, subject to certain conditions, provides for the grant to each independent director of options to acquire shares following their becoming a director and for the grant of additional options to acquire shares on the date of each annual shareholders’ meeting.  Generally, these options are granted with an exercise price equal to the fair value of the shares on the date granted and are subject to vesting.  As of December 31, 2010, options to purchase one share have been exercised.  

The following table sets forth the following information as of December 31, 2010: (i) the number of shares of our common stock to be issued upon the exercise of outstanding options; (ii) the weighted-average exercise price of such options, and (iii) the number of shares of our commons stock remaining available for future issuance under our equity compensation plans, other than the outstanding options described above.

Plan Category	Number of Shares of Common Stock to be Issued upon Exercise of Outstanding Options (a)		Weighted- Average Exercise Price of Outstanding Options		Number of Shares of Common Stock Remaining Available for Future Issuance under Equity Compensation Plans (excluding shares of common stock reflected in Column (a))
Equity Compensation Plans Approved by Shareholders		-		-		10,000
Equity Compensation Plans Not Approved by Shareholders		139		$   8.68		235

At our annual shareholders’ meeting held on October 14, 2008, our shareholders voted to approve the establishment of the Equity Compensation Plan, which, subject to certain conditions, authorizes (at the discretion of our board of directors) the issuance of stock options, restricted stock, stock appreciation rights and other similar awards to our employees in connection with compensation and incentive arrangements that may be established by the board of directors.  At December 31, 2010, no awards under the Equity Compensation Plan have been granted.   

During 2010, the Compensation Committee approved an executive bonus program pursuant to which our executives are eligible to receive bonuses payable in shares of restricted common stock.  For each executive, a portion of his award, if any, will be based upon individual performance as determined by the Compensation Committee at its discretion and a portion, if any, will be based on certain corporate performance measures.  An insignificant amount of expense was recorded during 2010 related to this bonus program.  As of the date of this filing, the Compensation Committee had not yet met to finalize the 2010 awards, if any.  Refer to Item 11. “Executive Compensation” for more information.

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Item 6. Selected Financial Data

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

For the years ended December 31, 2010, 2009, 2008, 2007 and 2006

(Amounts in thousands, except per share amounts)

		2010		2009		2008		2007		2006
Net investment properties	$	5,686,473	$	6,103,782	$	6,631,506	$	6,727,154	$	6,873,144
Total assets	$	6,386,836	$	6,928,365	$	7,606,664	$	8,305,831	$	8,328,274
Mortgages and notes payable	$	3,602,890	$	4,003,985	$	4,402,602	$	4,271,160	$	4,313,223
Total liabilities	$	4,090,244	$	4,482,119	$	5,011,276	$	4,685,539	$	4,684,935
Common stock and additional paid-in-capital	$	4,383,758	$	4,350,966	$	4,313,640	$	4,387,188	$	3,997,044
Total shareholders' equity	$	2,294,902	$	2,441,550	$	2,572,348	$	3,598,765	$	3,508,564
Total revenues	$	647,056	$	664,579	$	707,195	$	695,246	$	645,836
(Loss) income from continuing operations	$	(103,952)	$	(131,886)	$	(658,425)	$	351	$	24,794
Income (loss) from discontinued operations	$	9,245	$	16,477	$	(24,788)	$	42,683	$	5,174
Net (loss) income	$	(94,707)	$	(115,409)	$	(683,213)	$	43,034	$	29,968
Net (income) loss attributable to noncontrolling interests	$	(1,136)	$	3,074	$	(514)	$	(1,365)	$	1,975
Net (loss) income attributable to Company shareholders	$	(95,843)	$	(112,335)	$	(683,727)	$	41,669	$	31,943
(Loss) earnings per common share-basic and diluted:
Continuing operations	$	(0.22)	$	(0.27)	$	(1.43)	$	-	$	0.06
Discontinued operations		0.02		0.04		0.01		0.09		0.01
Net (loss) earnings per share attributable     to Company shareholders (a)	$	(0.20)	$	(0.23)	$	(1.42)	$	0.09	$	0.07
Distributions declared (b)	$	94,579	$	75,040	$	308,798	$	292,615	$	283,903
Distributions declared per common share (a)	$	0.20	$	0.16	$	0.64	$	0.64	$	0.64
Funds from operations (c)	$	135,170	$	141,844	$	(349,401)	$	287,601	$	286,398
Cash flows provided by operating activities (b)	$	184,072	$	249,837	$	309,351	$	318,641	$	296,578
Cash flows provided by (used in) investing activities	$	154,400	$	193,706	$	(178,555)	$	(511,676)	$	(536,257)
Cash flows (used in) provided by financing activities	$	(321,747)	$	(438,806)	$	(126,989)	$	82,644	$	168,583
Weighted average number of common shares     outstanding-basic and diluted		483,743		480,310		481,442		454,287		441,816

The selected financial data above should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this annual report.  Previously reported selected financial data reflects certain reclassifications to income from discontinued operations as a result of the sales of investment properties in 2010.  In addition, on January 1, 2009, we adopted new guidance on noncontrolling interests that required retrospective application, in which all periods presented reflect the necessary changes.

(a)

The net (loss) income and distributions declared per common share are based upon the weighted average number of common shares outstanding.  The $0.20 per share distribution declared for the year ended December 31, 2010 represented 70% of our FFO for the period.  Our distribution of current and accumulated earnings and profits for federal income tax purposes are taxable to shareholders as ordinary income.  Distributions in excess of these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent thereof (a return of capital) and thereafter as taxable gain.  The distributions in excess of earnings and profits will have the effect of deferring taxation on the amount of the distribution until the sale of the shareholders’ shares.  For the year ended December 31, 2010, 100% of the $83,385 tax basis d istribution in 2010 represented a return of capital.  In order to maintain our qualification as a REIT, we must make annual distributions to shareholders of at least 90% of our REIT taxable income.  REIT taxable income does not include capital gains.  Under certain circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet the REIT distribution requirements.  

(b)

The following table compares cash flows provided by operating activities to distributions declared:

		2010		2009		2008		2007		2006
Cash flows provided by operating activities	$	184,072	$	249,837	$	309,351	$	318,641	$	296,578
Distributions declared		94,579		75,040		308,798		292,615		283,903
Excess	$	89,493	$	174,797	$	553	$	26,026	$	12,675

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(c)

One of our objectives is to provide cash distributions to our shareholders from cash generated by our operations. Cash generated from operations is not equivalent to our (loss) income from continuing operations as determined under GAAP.  Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a standard known as FFO. We believe that FFO, which is a non-GAAP performance measure, provides an additional and useful means to assess the operating performance of REITs. As defined by NAREIT, FFO means net (loss) income computed in accordance with GAAP, excluding gains (or losses) from sales of investment properties, plus depreciation and amortization on investment properties including adjustments for unconsolidated joint ventures in which the REIT holds an interest. & nbsp;We have adopted the NAREIT definition for computing FFO because management believes that, subject to the following limitations, FFO provides a basis for comparing our performance and operations to those of other REITs.  FFO is not intended to be an alternative to “Net Income” as an indicator of our performance nor to “Cash Flows from Operating Activities” as determined by GAAP as a measure of our capacity to pay distributions.

FFO is calculated as follows:

		2010		2009		2008		2007		2006
Net (loss) income attributable to Company shareholders	$	(95,843)	$	(112,335)	$	(683,727)	$	41,669	$	31,943
Add:
Depreciation and amortization		267,500		279,361		337,070		280,688		260,042
Less:
Gain on sales of investment properties		(24,465)		(21,545)		-		(31,313)		-
Noncontrolling interests share of depreciation
related to consolidated joint ventures		(12,022)		(3,637)		(2,744)		(3,443)		(5,587)
Funds from operations	$	135,170	$	141,844	$	(349,401)	$	287,601	$	286,398

Depreciation and amortization related to investment properties for purposes of calculating FFO includes loss on lease terminations, which encompasses the write-off of tenant related assets, including tenant improvements and in-place lease values, as a result of early lease terminations.  Total loss on lease terminations for the years ended December 31, 2010, 2009 and 2008 were $13,826, $13,735 and $67,092, respectively.  

Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Risk Factors” and “Business” and elsewhere in this Annual Report on Form 10-K may constitute “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act).  Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be inco rrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates,” “focus,” “contemplates,” “aims,” “continues,” “would” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategies, plans or intentions. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

·

general economic, business and financial conditions, and changes in our industry and changes in the real estate markets in particular;

·

adverse economic and other developments in the Dallas-Fort Worth-Arlington area, where we have a high concentration of properties;

·

general volatility of the capital and credit markets;

·

changes in our business strategy;

·

defaults on, early terminations of or non-renewal of leases by tenants;

33

·

bankruptcy or insolvency of a major tenant or a significant number of smaller tenants;

·

increased interest rates and operating costs;

·

declining real estate valuations and impairment charges;

·

availability, terms and deployment of capital;

·

our failure to obtain necessary outside financing;

·

our expected leverage;

·

decreased rental rates or increased vacancy rates;

·

our failure to generate sufficient cash flows to service our outstanding indebtedness;

·

difficulties in identifying properties to acquire and completing acquisitions;

·

risks of real estate acquisitions, dispositions and redevelopment, including the cost of construction delays and cost overruns;

·

our failure to successfully operate acquired properties and operations;

·

our projected operating results;

·

our ability to manage our growth effectively;

·

our failure to successfully redevelop properties;

·

estimates relating to our ability to make distributions to our shareholders in the future;

·

impact of changes in governmental regulations, tax law and rates and similar matters;

·

our failure to qualify as a REIT;

·

future terrorist attacks in the U.S.;

·

environmental uncertainties and risks related to natural disasters;

·

lack or insufficient amounts of insurance;

·

financial market fluctuations;

·

availability of and our ability to attract and retain qualified personnel;

·

retention of our senior management team;

·

our understanding of our competition;

·

changes in real estate and zoning laws and increases in real property tax rates; and

·

our ability to comply with the laws, rules and regulations applicable to companies.

For a further discussion of these and other factors that could impact our future results, performance or transactions, see Item 1A. “Risk Factors.”  Readers should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements). We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date of this Annual Report on Form 10-K, except as required by applicable law.  

The following discussion and analysis compares the year ended December 31, 2010 to the years ended December 31, 2009 and 2008, and should be read in conjunction with our consolidated financial statements and the related notes included in this report.

34

Executive Summary

We are a fully integrated, self-administered and self-managed real estate company that owns and operates high quality, strategically located shopping centers and single-user retail properties. We are one of the largest owners and operators of shopping centers in the United States. As of December 31, 2010, our retail operating portfolio consisted of 266 properties with approximately 35,766,000 square feet of GLA was geographically diversified across 37 states and includes power centers, community centers, neighborhood centers and lifestyle centers, as well as single-user retail properties. Our retail properties are primarily located in strong retail districts within densely populated areas in highly visible locations with convenient access to interstates and major thoroughfares. Our retail properties are recently construct ed, with a weighted average age, based on ABR of only approximately 9.7 years since the initial construction or most recent major renovation. As of December 31, 2010, our retail operating portfolio was 88.7% leased, including leases signed but not commenced. In addition to our retail operating portfolio, as of December 31, 2010, we also held interests in 18 other operating properties, including 12 office properties and six industrial properties, 19 retail operating properties held by three unconsolidated joint ventures and eight retail properties under development.  The following summarizes our consolidated operating portfolio as of December 31, 2010:

Description	Number of Properties	GLA (in thousands)	Percent Leased	Percent Leased and Leases Signed (a)
Retail
Wholly-owned	211	29,224	86.0%	87.9%
Joint venture	55	6,542	90.4%	92.5%
Total retail	266	35,766	86.8%	88.7%
Office/Industrial
Wholly-owned	18	6,725	98.3%	98.3%
Total Consolidated Operating Portfolio	284	42,491	88.6%	90.2%
(a)  Includes leases signed but not commenced.

Our shopping centers are primarily anchored or shadow anchored by strong national and regional grocers, discount retailers and other retailers that provide basic household goods or clothing, including Target, TJX Companies, PetSmart, Best Buy, Bed Bath and Beyond, Home Depot, Kohl’s, Wal-Mart, Publix and Lowe’s.  As of December 31, 2010, over 90% of our shopping centers, based on GLA, were anchored or shadow anchored by a grocer, discount department store, wholesale club or retailers that sell basic household goods or clothing. Overall, we have a broad and highly diversified retail tenant base that includes approximately 1,600 tenants with no one tenant representing more than 3.2% of the total ABR generated from our retail operating properties, or our retail ABR.

We are encouraged by the leasing activity we have achieved during 2010.  Due in large part to the downturn in the economy, we previously had approximately 3,245,000 square feet of retail space become available due to the bankruptcies of Mervyns, Linens ‘n Things and Circuit City in 2008.  As of December 31, 2010, approximately 154,000 square feet of this space has been sold and 1,767,000 square feet has been re-leased, with an additional 468,000 square feet of this space with active letters of intent or in various stages of lease negotiations, for a total of approximately 73.6% of the space being addressed.  During the year ended December 31, 2010, we signed 531 new and renewal leases for a total of approximately 4,164,000 square feet.  As we continue to sign new leases, rental rates have generally been below the previous rates and we have continued to see increased demands for rent abatement and capital investment, in the form of tenant improvements and leasing commissions, required from us.  However, as retail sales and the overall economy continue to improve, such rental spreads are stabilizing.

35

2010 Company Highlights

Asset Dispositions and Debt Transactions

In 2010, we focused on strengthening our balance sheet by deleveraging through asset dispositions and debt refinancing transactions.  Specifically, we:

·

sold eight operating properties aggregating 894,500 square feet for $104,635, resulting in net proceeds of $21,024 and debt extinguishment of $106,791;

·

closed on partial sales of eight operating properties to our RioCan joint venture aggregating 1,146,200 square feet for $159,918, resulting in net proceeds of $48,616 and debt extinguishment of $97,888, and

·

obtained mortgages and notes payable proceeds of $737,890, made mortgages and notes payable repayments of $1,018,351 and received forgiveness of debt of $50,831.  

We plan to continue to pursue opportunistic dispositions of non-retail properties and free standing, triple-net retail properties to continue to focus our portfolio on well located, high quality shopping centers.  

Joint Ventures

We leverage our leasing and property management platform through the strategic formation, capitalization and management of joint ventures.  We partner with institutional capital providers to supplement our capital base in a manner accretive to our shareholders.  On May 20, 2010, we entered into definitive agreements to form a joint venture with a wholly-owned affiliate of RioCan and agreed to contribute eight shopping centers located in Texas to the joint venture. Under the terms of the agreements, RioCan contributed cash for an 80% interest in the venture and we contributed a 20% interest in the properties.  The joint venture acquired an 80% interest in the properties from us in exchange for cash, each of which was accounted for as a partial sale of real estate. As of December 31, 2010, our RioCan joint venture had acquired eight properties from us for a purchase price of $159,442, and had assumed from us mortg ages payable on these properties totaling approximately $97,888.  In addition, we have received additional earnout proceeds of $476 during the year ended December 31, 2010.

Leasing Activity

During the year ended December 31, 2010, we signed 531 new and renewal leases for a total of approximately 4,164,000 square feet.  We are encouraged by the solid leasing activity we have achieved during 2010 and believe that our occupancy will continue to increase over time.  

Distributions

We declared quarterly distributions totaling $0.20 per share during 2010.  We have increased the quarterly distribution rate for five consecutive quarters.

Economic Conditions and Outlook

Since bottoming in December 2009, the economy has evidenced consistent growth.  Economic growth, measured by gross domestic product, or GDP, was steady through the first three quarters of 2010, driven by improvement in consumer spending as well as an increase in private investment.  If GDP growth continues to improve, then the pace of the economic recovery that began in 2010 should continue to accelerate into 2011.

Recent growth in employment and consumer confidence also suggests that the U.S. economy is progressing.  Since December 2009, the economy has added more than 1,300,000 jobs in the private sector.  Further, real per capita disposable income growth, a key metric for the retail industry, increased 1.93% year-over-year in the third quarter, after a more modest 0.44% increase in 2009.

As employment and income growth accelerate, one might expect consumer confidence to increase accordingly, driving stronger retail sales growth.  Retail sales continued to recover in 2010, increasing at an average annual rate of 6.6% each month.  Furthermore, some consumers have shifted their behavior as a result of the recession, providing a boost to value-oriented grocers, discount retailers and other retailers that provide basic household goods or clothing.

36

Even as the economy recovered, retail construction activity, as measured by the value of construction put-in-place, remained very low through the first three quarters of 2010 because of high vacancy rates and a lack of available construction financing.  In the third quarter of 2010, the value of put-in-place construction totaled a seasonally adjusted annual rate of approximately $18,200,000, compared with fourth-quarter averages of approximately $43,700,000 between 2002 and 2008.

As job growth and higher confidence levels boost consumer demand, retail market conditions may begin to improve in 2011.  If demand rebounds, tenant competition for existing space is expected to increase because of the limited amount of new space becoming available.

Results of Operations

We believe that property net operating income (NOI) is a useful measure of our operating performance.  We define NOI as operating revenues (rental income, tenant recovery income, other property income, excluding straight-line rental income and amortization of acquired above and below market lease intangibles) less property operating expenses (real estate tax expense and property operating expense, excluding straight-line ground rent expense and straight-line bad debt expense).  Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs.

This measure provides an operating perspective not immediately apparent from GAAP operating income or net (loss) income.  We use NOI to evaluate our performance on a property-by-property basis because NOI allows us to evaluate the impact that factors such as lease structure, lease rates and tenant base, which vary by property, have on our operating results.  However, NOI should only be used as an alternative measure of our financial performance.  For reference and as an aid in understanding our computation of NOI, a reconciliation of NOI to net (loss) income as computed in accordance with GAAP has been presented.

37

Comparison of the years ended December 31, 2010 to December 31, 2009

The table below presents operating information for our same store portfolio consisting of 284 operating properties acquired or placed in service prior to January 1, 2009, along with a reconciliation to net operating income.  The properties in the same store portfolios as described were owned for the years ended December 31, 2010 and 2009. The properties in “Other investment properties” include the properties that were partially sold to our RioCan joint venture during 2010, none of which qualified for discontinued operations accounting treatment.

				2010		2009		Impact	Percentage
Revenues:
	Same store investment properties (284 properties):
		Rental income	$	484,838	$	492,306	$	(7,468)	(1.5)
		Tenant recovery income		111,573		117,008		(5,435)	(4.6)
		Other property income		16,131		18,713		(2,582)	(13.8)
	Other investment properties:
		Rental income		17,835		18,811		(976)	(5.2)
		Tenant recovery income		3,660		5,039		(1,379)	(27.4)
		Other property income		459		91		368	404.4
Expenses:
	Same store investment properties (284 properties):
		Property operating expenses		(98,374)		(110,246)		11,872	10.8
		Real estate taxes		(82,960)		(89,129)		6,169	6.9
	Other investment properties:
		Property operating expenses		(3,980)		(4,660)		680	14.6
		Real estate taxes		(3,064)		(4,124)		1,060	25.7
Property net operating income:
	Same store investment properties			431,208		428,652		2,556	0.6
	Other investment properties			14,910		15,157		(247)	(1.6)
Total net operating income				446,118		443,809		2,309	0.5
Other income (expense):
	Straight-line rental income			7,595		8,010		(415)
	Amortization of acquired above and below market lease intangibles			1,969		2,340		(371)
	Straight-line ground rent expense			(4,109)		(3,987)		(122)
	Straight-line bad debt expense			(124)		(3,693)		3,569
	Insurance captive income			2,996		2,261		735
	Depreciation and amortization			(246,841)		(248,894)		2,053
	Provision for impairment of investment properties			(14,430)		(53,900)		39,470
	Loss on lease terminations			(13,826)		(13,735)		(91)
	Insurance captive expenses			(3,392)		(3,655)		263
	General and administrative expenses			(18,119)		(21,191)		3,072
	Dividend income			3,472		10,132		(6,660)
	Interest income			740		1,483		(743)
	Loss on partial sales of investment properties			(385)		-		(385)
	Equity in income (loss) of unconsolidated joint ventures			2,025		(11,299)		13,324
	Interest expense			(260,950)		(234,077)		(26,873)
	Co-venture obligation expense			(7,167)		(597)		(6,570)
	Recognized gain on marketable securities, net			4,007		18,039		(14,032)
	Impairment of notes receivable			-		(17,322)		17,322
	Gain on interest rate locks			-		3,989		(3,989)
	Other expense			(3,531)		(9,599)		6,068
Loss from continuing operations				(103,952)		(131,886)		27,934	21.2
Discontinued operations:
	Operating loss			(14,561)		(9,906)		(4,655)
	Gain on sales of investment properties			23,806		26,383		(2,577)
Income from discontinued operations				9,245		16,477		(7,232)	(43.9)
	Net loss			(94,707)		(115,409)		20,702	17.9
	Net (income) loss attributable to noncontrolling interests			(1,136)		3,074		(4,210)	(137.0)
Net loss attributable to Company shareholders			$	(95,843)	$	(112,335)	$	16,492	14.7

38

Total net operating income increased by $2,309, or 0.5%.  Total rental income, tenant recovery and other property income decreased by $17,472, or 2.7%, and total property operating expenses decreased by $19,781, or 9.5%, for the year ended December 31, 2010, as compared to December 31, 2009.

Rental income. Rental income decreased $7,468 or 1.5%, on a same store basis from $492,306 to $484,838. The samestore decrease is primarily due to:

·

an increase of $11,034 composed of $34,388 as a result of new tenant leases replacing former tenants partially offset by $23,354 from early terminations and natural expirations of certain tenant leases;

·

a decrease of $17,616 due to reduced rent as a result of co-tenancy provisions in certain leases, reduced percentage rent as a result of decreased tenant sales, and increased rent abatements as a result of efforts to increase occupancy.

Overall, rental income decreased $8,444, or 1.7%, from $511,117 to $502,673, primarily due to the same store portfolio described above, in addition to a decrease of $976 in other investment properties primarily due to:

·

a decrease of $1,795 due to the partial sale of eight investment properties to our RioCan joint venture during 2010, partially offset by

·

an increase of $660 related to development properties placed into service subsequent to December 31, 2008.

Tenant recovery income.  Tenant recovery income decreased $5,435, or 4.6%, on a same store basis from $117,008 to $111,573, primarily due to:

·

a 9.2% decrease in common area maintenance recovery income, primarily due to reduced recoverable property operating expenses described below, and

·

a 6.9% decrease in real estate tax recovery, primarily resulting from reduced real estate tax expense as described below.

Overall, tenant recovery income decreased $6,814, or 5.6%, from $122,047 to $115,233, primarily due to the decrease in the same store portfolio described above and a decrease in recovery income from properties partially sold to our RioCan joint venture.  

Other property income.  Other property income decreased overall by $2,214, or 11.8%, due to decreases in termination fee income, parking revenue and direct recovery income.

Property operating expenses. Property operating expenses decreased $11,872, or 10.8%, on a same store basis from $110,246 to $98,374.  The same store decrease is primarily due to:

·

a decrease in bad debt expense of $3,832, and

·

a decrease in certain non-recoverable and recoverable property operating expenses of $2,311 and $5,011, respectively, due to the continued efforts of management to contain costs.

Overall, property operating expenses decreased $12,552, or 10.9%, from $114,906 to $102,354, due to the decrease in the same store portfolio described above, in addition to a decrease in bad debt expense of $443 and a decrease in certain non-recoverable and recoverable property operating expenses of $194 and $137, respectively, in other investment properties.

Real estate taxes.  Real estate taxes decreased $6,169, or 6.9%, on a same store basis from $89,129 to $82,960.  This decrease is primarily due to:

·

a net decrease of $4,609 over 2009 real estate tax expense primarily due to decreases in assessed values;

·

an increase of $2,089 in real estate tax refunds received during 2010 for prior year tax assessment adjustments; partially offset by

·

an increase in tax consulting fees of $574 as a result of successful reductions to proposed increases to assessed valuations or tax rates at certain properties.  

Overall, real estate taxes decreased $7,229, or 7.8%, from $93,253 to $86,024 primarily due to the decrease in the same store portfolio described above and a net decrease of $995 over 2009 real estate tax expense due to decreases in assessed values on certain properties partially sold to our RioCan joint venture.  

39

Other income (expense). Other income (expense) changed from net expense of $575,695 to net expense of $550,070. The decrease in net expense of $25,625, or 4.5%, is primarily due to:

·

a $39,470 decrease in provision for impairment of investment properties. Based on the results of our evaluations for impairment (see Notes 14 and 15 to the consolidated financial statements), we recognized impairment charges of $14,430 and $53,900 for the year ended December 31, 2010 and 2009, respectively. Although 41 of our properties had impairment indicators at December 31, 2010, undiscounted cash flows for those properties exceeded their respective carrying values by a weighted average of 53%. Accordingly, no additional impairment provisions were warranted for these properties;

·

a $17,322 decrease in impairment of notes receivable due to the impairment of two notes receivable in 2009;

·

a $13,324 decrease in equity in loss of unconsolidated joint ventures due primarily to impairments recorded by one joint venture in 2009 that did not reoccur in 2010, partially offset by

·

a $14,032 decrease in recognized gain on marketable securities primarily as a result of a significant liquidation of the marketable securities portfolio in 2009 and no other-than-temporary impairment recorded in 2010 as compared to other-than-temporary impairment of $24,831 recorded in 2009, and

·

a $26,873 increase in interest expense primarily due to:

-

higher interest rates on refinanced debt resulting in an increase of $15,927;

-

an increase of $16,214 related to the senior and junior mezzanine notes of IW JV that were entered into in December 2009, partially offset by

-

a decrease in prepayment penalties and other costs associated with refinancings of $2,685, and

-

a decrease in other financing costs of $1,632 due to a decrease in the amount of preferred returns paid to a joint venture partner.

Discontinued operations. Discontinued operations consist of amounts related to eight properties that were sold during each of the years ended December 31, 2010 and 2009.  We closed on eight properties during the year ended December 31, 2010 aggregating 894,500 square feet, for a combined sales price of $104,635.  The aggregated sales resulted in the extinguishment or repayment of $106,791 of debt, net sales proceeds totaling $21,024 and total gains of $23,806.  The properties disposed included two office buildings, five single-user retail properties and one medical center.  Included in this was an office building aggregating 382,600 square feet that was transferred through a deed in lieu of foreclosure to the property’s lender resulting in a gain on sale of $19,841.  There were no properties that qualified for held for sale accounting treatment as of December 31, 2010.  We clo sed on the sale of eight properties during the year ended December 31, 2009 aggregating 1,579,000 square feet, for a combined sales price of $338,057. The aggregated sales resulted in the extinguishment or repayment of $208,552 of debt, net sales proceeds totaling $123,944 and total gains on sale of $26,383. The properties sold included three office buildings, three single-user retail properties and two multi-tenant properties.  

40

Comparison of the years ended December 31, 2009 to December 31, 2008

The table below presents operating information for our same store portfolio consisting of 281 operating properties acquired or placed in service prior to January 1, 2008, along with a reconciliation to net operating income.  The properties in the same store portfolios as described were owned for the years ended December 31, 2009 and 2008.

				2009		2008		Impact	Percentage
Revenues:
	Same store investment properties (281 properties):
		Rental income	$	495,782	$	531,511	$	(35,729)	(6.7)
		Tenant recovery income		118,211		128,355		(10,144)	(7.9)
		Other property income		18,516		19,505		(989)	(5.1)
	Other investment properties:
		Rental income		15,335		8,831		6,504	73.6
		Tenant recovery income		3,836		2,133		1,703	79.8
		Other property income		288		237		51	21.5
Expenses:
	Same store investment properties (281 properties):
		Property operating expenses		(110,562)		(123,346)		12,784	10.4
		Real estate taxes		(89,872)		(85,828)		(4,044)	(4.7)
	Other investment properties:
		Property operating expenses		(4,344)		(3,037)		(1,307)	(43.0)
		Real estate taxes		(3,381)		(1,483)		(1,898)	(128.0)
Property net operating income:
	Same store investment properties			432,075		470,197		(38,122)	(8.1)
	Other investment properties			11,734		6,681		5,053	75.6
Total net operating income				443,809		476,878		(33,069)	(6.9)
Other income (expense):
	Straight-line rental income			8,010		12,181		(4,171)
	Amortization of acquired above and below market lease intangibles			2,340		2,504		(164)
	Straight-line ground rent expense			(3,987)		(5,186)		1,199
	Straight-line bad debt expense			(3,693)		(8,749)		5,056
	Insurance captive income			2,261		1,938		323
	Depreciation and amortization			(248,894)		(249,996)		1,102
	Provision for impairment of investment properties			(53,900)		(51,600)		(2,300)
	Loss on lease terminations			(13,735)		(64,648)		50,913
	Insurance captive expenses			(3,655)		(2,874)		(781)
	General and administrative expenses			(21,191)		(19,997)		(1,194)
	Dividend income			10,132		24,010		(13,878)
	Interest income			1,483		4,329		(2,846)
	Equity in loss of unconsolidated joint ventures			(11,299)		(4,939)		(6,360)
	Interest expense			(234,077)		(210,108)		(23,969)
	Co-venture obligation expense			(597)		-		(597)
	Recognized gain (loss) on marketable securities, net			18,039		(160,888)		178,927
	Impairment of goodwill			-		(377,916)		377,916
	Impairment of investment in unconsolidated entity			-		(5,524)		5,524
	Impairment of notes receivable			(17,322)		-		(17,322)
	Gain (loss) on interest rate locks			3,989		(16,778)		20,767
	Other expense			(9,599)		(1,062)		(8,537)
Loss from continuing operations				(131,886)		(658,425)		526,539	80.0
Discontinued operations:
	Operating loss			(9,906)		(24,788)		14,882
	Gain on sales of investment properties			26,383		-		26,383
Income (loss) from discontinued operations				16,477		(24,788)		41,265	166.5
	Net loss			(115,409)		(683,213)		567,804	83.1
	Net loss (income) attributable to noncontrolling interests			3,074		(514)		3,588	698.1
Net loss attributable to Company shareholders			$	(112,335)	$	(683,727)	$	571,392	83.6

41

Net operating income decreased by $33,069, or 6.9%.  Total rental income, tenant recovery and other property income decreased by $38,604, or 5.6%, and total property operating expenses decreased by $5,535, or 2.6%, for the year ended December 31, 2009, as compared to December 31, 2008.

Rental income. Rental income decreased $35,729 or 6.7%, on a same store basis from $531,511 to $495,782. The same store decrease is primarily due to:

·

a decrease of $28,548 in rental income due to tenant bankruptcies, primarily Linens ‘n Things, Circuit City and Mervyns;

·

a decrease of $3,657, composed of $7,292 as a result of early termination and natural expirations of certain tenant leases, partially offset by $3,635 from new tenant leases replacing former tenants;

·

a decrease of $4,409 due to reduced rent as a result of co-tenancy provisions in certain leases and reduced percentage rent as a result of decreased tenant sales; partially offset by

·

an increase of $1,939 due to earnouts completed subsequent to December 31, 2007.

Overall, rental income decreased $29,225, or 5.4%, from $540,342 to $511,117, primarily due to the same store portfolio described above, partially offset by an increase of $6,504 in other investment properties primarily due to:

·

an increase of $3,158 due to investment properties acquired subsequent to December 31, 2007, and

·

an increase of $2,854 related to development properties placed into service subsequent to December 31, 2007.

Tenant recovery income.  Tenant recovery income decreased $10,144, or 7.9%, on a same store basis from $128,355 to $118,211, primarily due to:

·

a 14.0% decrease in common area maintenance recovery income primarily due to reduced recoverable property operating expenses described below and reduced occupancy due to tenant vacancies resulting from 2008 bankruptcies and early lease terminations, and

·

a 2.9% decrease in real estate tax recovery primarily resulting from reduced occupancy as described above.

Overall, tenant recovery income decreased $8,441, or 6.5%, from $130,488 to $122,047, primarily due to the decrease in the same store portfolio described above, partially offset by recovery income from investment properties purchased after December 31, 2007 and phases of developments that have been placed into service subsequent to December 31, 2007.

Other property income.  Other property income decreased overall by $938, or 4.8%, due to decreases in termination fee income, parking revenue and direct recovery income.

Property operating expenses. Property operating expenses decreased $12,784, or 10.4%, on a same store basis from $123,346 to $110,562.  The same store decrease is primarily due to:

·

a decrease in bad debt expense of $6,674, and

·

a decrease in certain non-recoverable and recoverable property operating expenses of $6,449.

Overall, property operating expenses decreased $11,477, or 9.1%, from $126,383 to $114,906, due to the decrease in the same store portfolio described above, partially offset by an increase of $1,307 in other investment properties as follows:

·

an increase in bad debt expense of $209, and

·

an increase in certain non-recoverable and recoverable property operating expenses of $536 and $628, respectively.

Real estate taxes.  Real estate taxes increased $4,044, or 4.7%, on a same store basis from $85,828 to $89,872.  The same store increase is primarily due to:

·

an increase of $2,027 related to investment properties where vacated tenants with triple net leases had paid real estate taxes directly to the taxing authorities during 2008;

·

an increase of $1,092 in prior year estimates adjusted during 2009, based on actual real estate taxes paid;

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·

a net increase of $192 over 2008 real estate tax expense due to normal increases and decreases in assessed values;

·

a decrease of $445 in real estate tax refunds received during 2009 for prior year tax assessment adjustments, and

·

an increase in tax consulting fees of $288 as a result of successful reductions to proposed increases to assessed valuations or tax rates at certain properties.

Overall, real estate taxes increased $5,942, or 6.8%, from $87,311 to $93,253.  The other investment properties representing properties acquired subsequent to December 31, 2007 and phases of developments that have been placed into service resulted in an increase in real estate taxes of $1,898.

Other income (expense).  Other income (expense) changed from net expense of $1,135,303 to net expense of $575,695.  The decrease in net expense of $559,608, or 49.3% is primarily due to:

·

a $377,916 impairment of goodwill recognized in 2008;

·

a $178,927 decrease in recognized loss on marketable securities primarily as a result of a significant liquidation of the marketable securities portfolio in 2009 and $24,831 of other-than-temporary impairment recorded in 2009 as compared to other-than-temporary impairment of $160,327 recorded in 2008;

·

a $50,913 decrease in loss on lease terminations as a result of a decrease in tenants that vacated prior to lease expiration due to tenant bankruptcies and economic challenges facing tenants during 2009 as compared to 2008, and

·

a $20,767 decrease in loss on interest rate locks due to impairment recorded during 2008; partially offset by

·

a $13,878 decrease in dividend income due to sales of marketable securities, dividend reductions and suspensions;

·

a $4,171 decrease in straight-line rental income primarily due to reduced occupancy from tenant vacancies  and tenant bankruptcies in 2008 and tenants with co-tenancy rent reductions in 2009 as a result of such bankruptcies;

·

a $2,846 decrease in interest income as a result of full or partial payoffs of notes receivable subsequent to December 31, 2007, the impairment of a note receivable as of June 30, 2009 and $1,623 as a result of short-term investments receiving lower interest rates in interest bearing accounts, and

·

an increase of $23,969 in interest expense primarily due to:

-

higher interest rates on refinanced debt resulting in an increase of $6,667 and additional interest expense of $4,068 incurred prior to the completion of certain long-term refinancings;

-

prepayment penalties and other costs associated with refinancings of $5,066;

-

decreases in capitalized interest of $6,256 due to certain phases of our developments being placed into service;

-

an increase in interest on our line of credit of $3,389 due primarily to an increase in the interest rate, and

-

an increase of $2,650 related to the fixed variable spread related to our interest rate swaps, partially offset by decreases in margin payable interest of $3,192 due to decreases in the margin payable balance.

Discontinued operations.  Discontinued operations consist of amounts related to eight properties that were sold during each of the years ended December 31, 2010 and 2009.  Refer to discussion comparing 2010 and 2009 results for more detail on the transactions that resulted in discontinued operations.

Liquidity and Capital Resources

We anticipate that cash flows from operating activities will provide adequate capital for all scheduled interest and monthly principal payments on outstanding indebtedness, current and anticipated tenant improvement or other capital obligations, the shareholder distribution required to maintain REIT status and compliance with financial covenants of our credit agreement for the next twelve months and beyond.   

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Our primary expected uses and sources of our consolidated cash and cash equivalents are as follows:

USES		SOURCES
Short-Term:	Short-Term:
· Tenant improvement allowances · Improvements made to individual properties that are not recoverable through common area maintenance charges to tenants · Distribution payments · Debt repayment requirements, including principal, interest and costs to refinance · Corporate and administrative expenses		· Operating cash flow · Available borrowings under revolving credit facility · Distribution reinvestment plan · Secured loans collateralized by individual properties · Asset sales · Cash and cash equivalents
Long-Term:	Long-Term:
· Acquisitions · New development · Major redevelopment, renovation or expansion programs at individual properties · Debt repayment requirements, including both principal and interest		· Secured loans collateralized by individual properties · Long-term construction project financing · Joint venture equity from institutional partners · Sales of marketable securities · Asset sales

One of our main areas of focus over the last few years has been on strengthening our balance sheet and addressing debt maturities.  We have pursued this goal through a combination of the refinancing or repayment of maturing debt, a reduction in our rate of distributions to shareholders, the suspension of our share repurchase program and total or partial dispositions of assets through sales or contributions to joint ventures.  In addition, we focused on controlling operating expenses and deferring certain discretionary capital expenditures to preserve cash.    

The table below summarizes our consolidated indebtedness at December 31, 2010:

Debt		Aggregate Principal Amount at 12/31/10	Weighted Average Interest Rate	Years to Maturity/ Weighted Average Years to Maturity
Mortgages payable	$	2,871,573	5.81%	5.7 years
IW JV mortgages payable		495,632	7.50%	8.9 years
IW JV senior mezzanine note		85,000	12.24%	8.9 years
IW JV junior mezzanine note		40,000	14.00%	8.9 years
Construction loans		86,768	3.85%	1.3 years
Mezzanine note		13,900	11.00%	3.0 years
Margin payable		10,017	0.61%	1.0 year
Mortgages and notes payable		3,602,890
Line of credit		154,347	5.25%	0.8 year
Total consolidated indebtedness	$	3,757,237

Mortgages Payable and Construction Loans

Mortgages payable outstanding as of December 31, 2010, including construction loans and IW JV mortgages payable which are discussed further below, were $3,453,973 and had a weighted average interest rate of 5.99% at December 31, 2010. Of this amount, $3,349,816 had fixed rates ranging from 4.44% to 10.04% and a weighted average fixed rate of 6.04% at December 31, 2010. The remaining $104,157 of outstanding indebtedness represented variable rate loans with a weighted average interest rate of 4.47% at December 31, 2010. Properties with a net carrying value of $5,170,029 at December 31, 2010 and related tenant leases are pledged as collateral for the mortgage loans and development properties with a net carrying value of $62,704 at December 31, 2010 and related tenant leases are pledged as collateral for the construction loans.  Generally, other than IW JV mortgages payable, our mortgages payable are secured by individual properties or small groups of properties.  As of December 31, 2010, scheduled maturities for our outstanding mortgage indebtedness had various due dates through March 1, 2037.

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During the year ended December 31, 2010, we obtained mortgages and notes payable proceeds of $737,890, made mortgages and notes payable repayments of $1,018,351 and received debt forgiveness of $50,831. In addition, our joint venture with RioCan assumed $97,888 of mortgages payable from us as of December 31, 2010. The new mortgages payable that we entered into during the year ended December 31, 2010 have interest rates ranging from 2.48% to 8.00% and maturities up to ten years. The stated interest rates of the loans repaid during the year ended December 31, 2010 ranged from 1.65% to 6.75%. We also entered into modifications of existing loan agreements, which extended the maturities of $229,313 of mortgages payable up to December 2012.

IW JV 2009 Mortgages Payable and Mezzanine Notes

Upon formation of IW JV, a wholly-owned subsidiary, on November 29, 2009, we transferred a portfolio of 55 investment properties and the entities which owned them into it. Subsequently, in connection with a $625,000 debt refinancing transaction, which consisted of $500,000 of mortgages payable and $125,000 of notes payable, on December 1, 2009, we raised additional capital of $50,000 from a related party, Inland Equity, in exchange for a 23% noncontrolling interest in IW JV. IW JV, which is controlled by us, and therefore consolidated, will continue to be managed and operated by us. Inland Equity is owned by certain individuals, including Daniel L. Goodwin, who beneficially owns more than 5% of our common stock, and Robert D. Parks, who was the Chairman of our Board until October 12, 2010 and who is Chairman of the Board of certain affiliates of The Inland Group, Inc. The independent directors committee reviewed and recommended appro val of this transaction to our board of directors.

Mezzanine Note and Margin Payable

During the year ended December 31, 2010, we borrowed $13,900 from a third party in the form of a mezzanine note and used the proceeds as a partial paydown of the mortgage payable, as required by the lender.  The mezzanine note bears interest at 11.00% and matures in three years. Additionally, we purchase a portion of our securities through a margin account. As of December 31, 2010 and 2009, we had recorded a payable of $10,017 and none, respectively, for securities purchased on margin. This debt bears a variable interest rate of LIBOR plus 35 basis points. At December 31, 2010, this rate was equal to 0.61%. This debt is due upon demand. The value of our marketable securities serves as collateral for this debt. During the year ended December 31, 2010, we borrowed $22,860 on our margin account and paid down $12,843.

Line of Credit

As of December 31, 2010, we had a credit agreement with KeyBank National Association and other financial institutions for borrowings up to $200,000, subject to a collateral pool requirement. Based on the appraised value of the collateral pool, our ability to borrow was limited to $160,902 as of December 31, 2010. The credit agreement had a maturity date of October 14, 2011. The outstanding balance on the line of credit at December 31, 2010 and December 31, 2009 was $154,347 and $107,000, respectively.  As of December 31, 2010, management believes we were in compliance with all financial covenants under the credit agreement.

On February 4, 2011, we amended and restated our existing credit agreement to provide for a senior secured credit facility in the aggregate amount of $585,000, consisting of a $435,000 senior secured revolving line of credit and a $150,000 secured term loan from a number of financial institutions. The senior secured revolving line of credit also contains an accordion feature that allows us to increase the availability thereunder to up to $500,000 in certain circumstances.

Upon closing, we borrowed the full amount of the term loan and, through the date of this filing, we had a total of $210,000 outstanding under the senior secured line of credit, including $154,347 that had been outstanding under our line of credit prior to the amendment and restatement of our credit agreement and $55,653 of additional borrowings. We used the secured term loan and the additional borrowings under our senior secured revolving line of credit to, among other things repay $178,591 of mortgage debt, including debt forgiveness of $10,723, that was secured by 16 properties and had a weighted average interest rate of 4.90% per annum and had matured or was maturing in 2011.

Availability. The aggregate availability under the senior secured revolving line of credit shall at no time exceed the lesser of (x) 65% of the appraised value of the borrowing base properties through the date of the issuance of our financial statements for the quarter ending March 31, 2012 and 60% thereafter and (y) the amount that would result in a debt service coverage ratio for the borrowing base properties of not less than 1.50x through the date of the issuance of our financial statements for the quarter ending March 31, 2012 and 1.60x thereafter, in each case, less the outstanding balance

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under the secured term loan. As of the date of this filing, the total availability under the revolving line of credit was $212,000, of which we had borrowed $210,000.

Maturity and Interest. The senior secured revolving line of credit and the secured term loan mature on February 3, 2013; provided that we have a one-year extension option that we may exercise as long as there is no existing default, we are in compliance with all covenants and we pay an extension fee.  The senior secured revolving line of credit and the secured term loan bear interest at a rate per annum equal to the London Interbank Offered Rate, or LIBOR, plus a margin of between 2.75% and 4.00% based on our leverage ratio as calculated under the credit agreement. As of the date of this filing, the interest rate under the senior secured revolving line of credit and secured term loan is 4.31%.

Security. The senior secured revolving line of credit and secured term loan are secured by mortgages on the borrowing base properties and are our direct recourse obligation.

Financial Covenants. The senior secured revolving line of credit and secured term loan include the following financial covenants: (i) maximum leverage ratio not to exceed 67.5%, which ratio will be reduced to 65% beginning on the date of the issuance of our financial statements for the quarter ending December 31, 2011 and 60% beginning on the date of the issuance of our financial statements for the quarter ending June 30, 2012, (ii) minimum fixed charge coverage ratio of not less than 1.40x, which ratio will be increased to 1.45x beginning on the date of the issuance of our financial statements for the quarter ending December 31, 2011 and 1.50x beginning on the date of the issuance of our financial statements for the quarter ending December 31, 2012, (iii) consolidated net worth of not less than $1,750,000 plus 75% of the net proceeds of any future equity contributions or sales of treasury stock received by us (iv) minimum average economic occupancy rate of greater than 80% excluding pre-stabilization properties under construction, (v) unhedged variable rate debt of not more than 20% of total asset value, (vi) maximum dividend payout ratio of 95% of FFO or an amount necessary to maintain REIT status and (vii) secured recourse indebtedness and guarantee obligations excluding the senior secured revolving line of credit and secured term loan may not exceed $100,000.

Other Covenants and Events of Default. The senior secured revolving line of credit and secured term loan limit the percentage of our total asset value that may be invested in unimproved land, unconsolidated joint ventures, construction in progress and mortgage notes receivable, require that we obtain consent for any sale of assets with a value greater than 10% of our total asset value or merger resulting in an increase to our total asset value by more than 25% and contain other customary covenants. The senior secured revolving line of credit and secured term loan also contain customary events of default, including but not limited to, non-payment of principal, interest, fees or other amounts, breaches of covenants, defaults on any recourse indebtedness in excess of $20,000 or any non-recourse indebtedness in excess of $100,000 in the aggregate (subject to certain carveouts, including $30,000 of non-recourse indebtedness tha t is currently in default), failure of certain members of management (or a reasonably satisfactory replacement) to continue to be active on a daily basis in our management and bankruptcy or other insolvency events.

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Debt Maturities

The following table shows the scheduled maturities of mortgages payable, notes payable, margin payable and the line of credit as of December 31, 2010 for each of the next five years and thereafter and does not reflect the impact of any 2011 debt activity:

				2011		2012		2013		2014		2015		Thereafter		Total		Fair Value
Maturing debt (a) :
	Fixed rate debt:
	Mortgages payable (b)		$	646,060	$	411,493	$	305,913	$	219,832	$	468,143	$	1,283,343	$	3,334,784	$	3,364,801
	Notes payable			-		-		13,900		-		-		125,000		138,900		149,067
	Total fixed rate debt		$	646,060	$	411,493	$	319,813	$	219,832	$	468,143	$	1,408,343	$	3,473,684	$	3,513,868
	Variable rate debt:
	Mortgages payable		$	15,987	$	88,170	$	-	$	-	$	-	$	-	$	104,157	$	104,157
	Line of Credit			154,347		-		-		-		-		-		154,347		154,347
	Margin payable			10,017		-		-		-		-		-		10,017		10,017
	Total variable rate debt			180,351		88,170		-		-		-		-		268,521		268,521
Total maturing debt			$	826,411	$	499,663	$	319,813	$	219,832	$	468,143	$	1,408,343	$	3,742,205	$	3,782,389
Weighted average interest
	rate on debt:
	Fixed rate debt			5.43%		5.46%		5.55%		7.17%		5.78%		7.16%
	Variable rate debt			5.16%		4.00%		-		-		-		-
	Total			5.37%		5.20%		5.55%		7.17%		5.78%		7.16%
(a)		The debt maturity table does not include any premiums or discounts, of which $17,534 and $(2,502), net of accumulated amortization, respectively, is outstanding as of December 31, 2010.
(b)		Includes $67,504 of variable rate debt that was swapped to a fixed rate.

The maturity table excludes other financings and the co-venture obligation as described in Notes 1 and 10 to the consolidated financial statements. The maturity table also excludes accelerated principal payments that may be required as a result of covenants or conditions included in certain loan agreements. In these cases, the total outstanding mortgage payable is included in the year corresponding to the loan maturity date. The maturity table includes $123,198 of mortgages payable that had matured as of December 31, 2010 in the 2011 column.

As of December 31, 2010, in addition to the $123,198 that had matured, we had $517,513 of mortgages payable, excluding principal amortization, maturing in 2011.  The following table sets forth our progress through the date of this filing in addressing 2010 and 2011 maturities:

		Matured as of December 31, 2010		Maturing in 2011
Repaid or received debt forgiveness and added the underlying property as collateral to the senior secured credit facility	$	65,902	$	107,824
Refinanced		-		10,153
Other repayments		-		1,463
Total addressed subsequent to December 31, 2010		65,902		119,440
Expected to be repaid and the underlying property will be added as collateral to the senior secured credit facility in March 2011		21,715		81,809
Actively marketing to sell or refinance related properties or seeking extensions		35,581		316,264
	$	123,198	$	517,513

As of the date of this filing, we had $76,057 of mortgages, secured by seven properties, that had matured and not been repaid, all of which are non-recourse. For $21,715 of these mortgages, we expect to repay the mortgage with borrowings under our senior secured revolving line of credit in March 2011. We are currently in active negotiations with the lenders regarding an appropriate course of action, including the potential refinancing of a discounted payoff amount, for the remaining $54,342 of mortgages payable. No assurance can be provided that these negotiations will result in favorable outcomes for us. One of the lenders with respect to a mortgage payable for $29,965 has asserted that certain events have occurred that trigger recourse to us; however, we believe that we have substantive defenses with respect to those claims.

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Although the credit environment continues to be challenging, we believe that the credit markets have opened up considerably compared to the last few years. As such, we continue to pursue opportunities with the nation’s largest banks, life insurance companies, regional and local banks, and have demonstrated reasonable success in addressing our maturing debt.

Distributions and Equity Transactions

We intend to continue to qualify as a REIT for U.S. federal income tax purposes. The Code generally requires that a REIT distribute annually at least 90% of its REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gain, in order to qualify as a REIT, and the Code generally taxes a REIT on any retained income.

To satisfy the requirements for qualification as a REIT and generally not be subject to U.S. federal income and excise tax, we intend to make regular quarterly distributions of all or substantially all of our REIT taxable income to holders of our common stock out of assets legally available for such purposes. Our future distributions will be at the sole discretion of our board of directors. When determining the amount of future distributions, we expect that our board of directors will consider, among other factors, (i) the amount of cash generated from our operating activities, (ii) our expectations of future cash flows, (iii) our determination of near-term cash needs for debt repayments, existing or future share repurchases, and selective acquisitions of new properties, (iv) the timing of significant re-leasing activities and theestablishment of additional cash reserves for anticipated tenant i mprovements and general property capital improvements, (v) our ability to continue to access additional sources of capital, (vi) the amount required to be distributed to maintain our status as a REIT and to reduce any income and excise taxes that we otherwise would be required to pay and (vii) any limitations on our distributions contained in our credit or other agreements, including, without limitation, in our senior secured revolving line of credit and secured term loan, which limit our distributions to the greater of 95% of FFO or the amount necessary for us to maintain our qualification as a REIT.

As part of the strengthening of our balance sheet over the past few years, we have reduced the rate of our distributions to shareholders.  The following table sets forth the amount of our distributions declared during the years ended December 31, 2010, 2009 and 2008 compared to cash flows provided by operating activities for each of these periods:

		2010		2009		2008
Cash flows provided by operating activities	$	184,072	$	249,837	$	309,351
Distributions declared		94,579		75,040		308,798
Excess	$	89,493	$	174,797	$	553

Effective November 19, 2008, the board of directors voted to suspend our share repurchase program. We maintain a DRP which allows our shareholders who have purchased shares in our offerings to automatically reinvest distributions by purchasing additional shares from us. Such purchases under our DRP are not subject to brokerage commission fees or service charges. In conjunction with our estimate of the value of a share of our stock for annual statement of value purposes, the board of directors amended our DRP, effective March 1, 2010, solely to modify the purchase price. Thus, since March 1, 2010, additional shares of our stock purchased under ourDRP have been purchased at a price of $6.85 per share.  As of December 31, 2010, we had issued approximately 70,683 shares pursuant to the DRP for an aggregate amount of $675,503. During the year ended December 31, 2010, we received $32,731 in in vestor proceeds through our DRP.

Capital Expenditures and Development Joint Venture Activity

We anticipate that capital demands to meet obligations related to capital improvements with respect to properties will be minimal for the foreseeable future (as many of our properties have recently been constructed or renovated) and can be met with funds from operations and working capital.

The following table provides summary information regarding our consolidated and unconsolidated properties under development as of December 31, 2010. As of December 31, 2010, we did not have any active construction ongoing at our development properties, and, currently, we only intend to develop the remaining estimated total GLA to the extent that we have pre-leased the space to be developed. If we were to pre-lease all of the remaining estimated GLA, we estimate that the total remaining costs to complete the development of this space would be $55,754, which we expect to fund through

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construction loans and proceeds of potential sales of our Bellevue Mall and South Billings Center development properties. As of December 31, 2010, the ABR from the portion of our development properties with respect to which construction has been completed was $5,300.

		Our Ownership		Carrying Value at		Construction Loan Balance at
Location	Description	Percentage		December 31, 2010 (a)		December 31, 2010
Frisco, Texas	Parkway Towne Crossing	75.0%	$	26,085	$	20,757
Dallas, Texas	Wheatland Towne Crossing	75.0%		14,825		5,712
Henderson, Nevada	Lake Mead Crossing	25.0%		81,597		48,949
Henderson, Nevada	Green Valley Crossing	50.0%		23,750		11,350
Billings, Montana	South Billings Center	40.0%		5,077		-
Nashville, Tennessee	Bellevue Mall	100.0%		26,448		-
Denver, Colorado	Hampton Retail Colorado	95.8%		6,836	(b)	4,031	(c)
			$	184,618	$	90,799
(a) Represents the total investment less accumulated depreciation
(b) Represents the total investment less accumulated depreciation for the two properties under development.  There is an additional $19,447 of carrying value related to four operational properties held by the joint venture.
(c) The construction loan balance is only the portion related to two properties under development held by the joint venture.  There is an additional $16,367 construction loan related to four operational properties held by the joint venture.

Asset Disposition and Operating Joint Venture Activity

During 2010 and 2009, our asset sales and partial sales of assets to operating joint ventures were an integral factor in our deleveraging and recapitalization efforts.  The following table highlights the results of our asset dispositions during 2010 and 2009:

	Number of Assets Sold	Square Footage	Combined Sales Price		Total Debt Extinguished			Net Sales Proceeds
2010 Dispositions	8	894,500	$	104,635	$	106,791	$	21,024
2009 Dispositions	8	1,579,000	$	338,057	$	208,552	$	123,944

Statement of Cash Flows Comparison for the Years Ended December 31, 2010, 2009 and 2008

Cash Flows from Operating Activities

Cash flows provided by operating activities were $184,072, $249,837 and $309,351 for the years ended December 31, 2010, 2009 and 2008, respectively, which consists primarily of net income from property operations, adjusted for non-cash charges for depreciation and amortization, provision for impairment of investment properties and marketable securities and gain on extinguishment of debt.  The decrease in operating cash flows comparing 2010 to 2009 of $65,765 is primarily attributable to an increase in interest paid of $26,003 which resulted, in part, from our refinancing efforts, a decrease in dividends received of $8,607, net cash paid in conjunction with the litigation matter settlement of $8,006, an increase in the cash portion of co-venture obligation expense of $5,584 and an increase in leasing fees paid of $1,124.  We have addressed a significant amount of mortgage debt exposure over the past two years and with ou r focus on leasing activity to increase occupancy and rental income, we believe that we will be able to meet our short-term and long-term cash requirements.

Cash Flows from Investing Activities

Cash flows provided by (used in) investing activities were $154,400, $193,706 and $(178,555), respectively, for the years ended December 31, 2010, 2009 and 2008.  Of these amounts, $(22,967), $(38,680) and $46,966, respectively, represent restricted escrow activity.  During 2010 and 2009, those amounts were used to fund restricted escrow accounts, some of which are required under certain new mortgage debt arrangements.  In addition, $35,198, $40,778 and $132,233, respectively, were used for acquisition of new properties, earnouts at existing properties, capital expenditures and tenant improvements and $3,219, $15,297 and $73,137, respectively, were used for existing developments projects.  During each of the years ended December 31, 2010 and 2009, we sold eight properties, which resulted in sales proceeds of $96,059

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and $172,007, respectively.  During the year ended December 31, 2010, we partially sold eight properties to an unconsolidated joint venture, which resulted in proceeds of $48,616.  There were no sales executed during 2008.  In addition, during the years ended December 31, 2010, 2009 and 2008, we purchased marketable securities of none, $190 and $28,443, respectively, and received proceeds from sales of marketable securities of $8,629, $125,088 and $34,789, respectively.

We will continue to execute our strategy to dispose of select non-retail properties and free standing, triple-net retail and other properties on an opportunistic basis; however it is uncertain given current market conditions when and whether we will be successful in disposing of these assets and whether such sales could recover our original cost.  Additionally, tenant improvement costs associated with re-leasing vacant space could continue to be significant.

Cash Flows from Financing Activities

Cash flows used in financing activities were $321,747, $438,806 and $126,989, respectively, for years ended December 31, 2010, 2009 and 2008.  We (used)/generated $(280,668), $(333,423) and $306,459, respectively, related to the net activity from proceeds from new mortgages secured by our properties, the secured line of credit, other financings, the co-venture arrangement, principal payments, payoffs and the payment and refund of fees and deposits.  During the years ended December 31, 2010, 2009 and 2008, we also generated/(used) $10,017, $(56,340) and $(51,700), respectively, through the net borrowing of margin debt.  We paid $50,654, $47,651 and $155,592, respectively, in distributions, net of distributions reinvested through DRP, to our shareholders for the years ended December 31, 2010, 2009 and 2008.

Off-Balance-Sheet Arrangements

Effective April 27, 2007, we formed a strategic joint venture (MS Inland) with a large state pension fund. Under the joint venture agreement we contributed 20% of the equity and our joint venture partner contributed 80% of the equity. As of December 31, 2010, the joint venture had acquired seven properties (which we contributed) with a purchase price of approximately $336,000 and had assumed from us mortgages on these properties totaling approximately $188,000 at the time of assumption.

On May 20, 2010, we entered into definitive agreements to form our RioCan joint venture. As of December 31, 2010, our RioCan joint venture had acquired eight properties from us for a purchase price of $159,442, and had assumed from us mortgages payable on these properties totaling approximately $97,888. We had a 20% equity interest in our RioCan joint venture as of December 31, 2010.

In addition, we have entered into the two other unconsolidated joint ventures that are described in Note 11 to the consolidated financial statements.

The table below summarizes the outstanding debt of our unconsolidated joint ventures at December 31, 2010, none of which has been guaranteed by us:

Joint Venture		Ownership Interest		Aggregate Principal Amount	Weighted Average Interest Rate	Years to Maturity/ Weighted Average Years to Maturity
RioCan (1)		20.0%	$	99,310	5.61%	2.8 years
MS Inland (2)		20.0%	$	177,380	5.29%	3.3 years
Hampton Retail Colorado (3)		95.8%	$	20,398	5.40%	3.7 years
(1)	Aggregate principal amount excludes mortgage premiums of $2,045 and discounts of $86, net of accumulated amortization.
(2)	Aggregate principal amount excludes mortgage premiums of $51 and discounts of $451, net of accumulated amortization.
(3)	The weighted average interest rate increases to 6.15% on September 1, 2012 and to 6.90% on September 1, 2013.  Aggregate principal amount excludes mortgage premiums of $4,471, net of accumulated amortization.

Other than described above, we have no off-balance-sheet arrangements as of December 31, 2010 that are reasonably likely to have a current or future material effect on our financial condition, results of operations and cash flows.

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Contractual Obligations

The table below presents our obligations and commitments to make future payments under debt obligations and lease agreements as of December 31, 2010.

		Payment due by period
		Less than 1 year (2)		1-3 years		3-5 years		More than 5 years		Total
Long-term debt (1)
Fixed rate	$	646,060	$	731,306	$	687,975	$	1,408,343	$	3,473,684
Variable rate		180,351		88,170		-		-		268,521
Interest		211,746		337,140		263,600		565,483		1,377,969
Operating lease obligations (3)		6,244		12,850		13,339		547,849		580,282
Purchase obligations (4)		1,400		-		-		-		1,400
	$	1,045,801	$	1,169,466	$	964,914	$	2,521,675	$	5,701,856

(1)

The Contractual Obligations table does not include any premium or discounts of which $17,534 and $(2,502) net of accumulated amortization, respectively, is outstanding as of December 31, 2010.  The table also excludes accelerated principal payments that may be required as a result of conditions included in certain loan agreements and other financings and co-venture obligations as described in Notes 1 and 10 to the consolidated financial statements as we are unable to determine the exact timing and amount of future payments.  Interest payments related to the variable rate debt were calculated using the corresponding interest rates as of December 31, 2010.

(2)

Included in the variable rate debt is $154,347 of borrowings under our credit agreement due in 2011 and $10,017 of margin debt secured by our portfolio of marketable securities.  These borrowings may be repaid over time upon sale of our portfolio of marketable securities.

The remaining borrowings outstanding through December 31, 2011 include amortization and maturities of mortgages and notes payable.  This includes 45 mortgage loans and one construction loan that mature in 2011.  The mortgages payable of $123,198 that had matured as of December 31, 2010 are also included in these amounts.  Mortgage loans are intended to be refinanced or paid off in 2011 using a combination of proceeds raised from expected asset sales, retained capital as a result of the suspension of the share repurchase program, and proceeds from our credit agreement, which was amended in February 2011 (See Note 9 to the consolidated financial statements).  The construction loans will be extended, paid off at the time of sale of the property, or converted to permanent financing upon completion.

(3)

We lease land under non-cancelable leases at certain of the properties expiring in various years from 2018 to 2105. The property attached to the land will revert back to the lessor at the end of the lease. We lease office space under non-cancellable leases expiring in various years from 2011 to 2013.

(4)

Purchase obligations include earnouts on previously acquired properties.

Contracts and Commitments

We have acquired certain properties which have earnout components, meaning that we did not pay for portions of these properties that were not rent producing at the time of acquisition.  We are obligated, under these agreements, to pay for those portions, as additional purchase price, when a tenant moves into its space and begins to pay rent.  The earnout payments are based on a predetermined formula.  Each earnout agreement has a time limit regarding the obligation to pay any additional monies.  The time limits generally range from one to three years.  If, at the end of the time period allowed, certain space has not been leased and occupied, generally, we will own that space without any further payment obligation.  As of December 31, 2010, we may pay as much as $1,400 in the future as retail space covered by earnout agreements.  During the year ended December 31, 2010, we paid $501 for one earnout at an existing property.

We have previously entered into one construction loan agreement, one secured installment note and one other installment note agreement, one of which was impaired as of December 31, 2009 and written off on March 31, 2010.  In conjunction with the two remaining note agreements, we have funded our total commitments of $8,680.  The combined receivable balance at December 31, 2010 and 2009 was $8,290 and $8,330, respectively, net of allowances of $300 and $17,209, respectively.  In May 2010, we entered into an agreement related to the secured installment note that extended the maturity date from May 31, 2010 to February 29, 2012.

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.  For example, significant estimates and assumptions have been made with respect to useful lives of assets; capitalization of development and leasing costs; fair value measurements; provision for impairment, including estimates of holding periods, capitalization rates, and discount rates (where applicable); provision for income taxes; recoverable amounts of receivables; deferred taxes and initial valuations and related amortization periods of deferred costs and intangibles, particularly with respe ct to property acquisitions.  Actual results could differ from those estimates.

Summary of Significant Accounting Policies

Critical Accounting Policies and Estimates

The following disclosure pertains to accounting policies and estimates we believe are most “critical” to the portrayal of our financial condition and results of operations which require our most difficult, subjective or complex judgments.  These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain.  GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates.  This discussion addresses our judgment pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assump tions.

Acquisition of Investment Property

We allocate the purchase price of each acquired investment property between the estimated fair values of land, building and improvements, acquired above market and below market lease intangibles, in-place lease value, any assumed financing that is determined to be above or below market, and the value of customer relationships, if any, and goodwill, if determined to meet the definition of a business under the guidance.  The allocation of the purchase price is an area that requires judgment and significant estimates.  Beginning in 2009, transaction costs associated with any acquisitions are expensed as incurred.  In some circumstances, we engage independent real estate appraisal firms to provide market information and evaluations that help support our purchase price allocations; however, we are ultimately responsible for the purchase price allocations.  We determine whether any financing assumed is above or below ma rket based upon comparison to similar financing terms at the time of acquisition for similar investment properties.  We allocate a portion of the purchase price to the estimated, acquired in-place lease value based on estimated lease execution costs for similar leases, as well as, lost rental payments during an assumed lease-up period when calculating as-if-vacant fair values.  We consider various factors including geographic location and size of the leased space.  We also evaluate each significant acquired lease based upon current market rates at the acquisition date and consider various factors, including geographical location, size and location of the leased space within the investment property, tenant profile, and the credit risk of the tenant in determining whether the acquired lease is above or below market.  If an acquired lease is determined to be above or below market, we allocate a portion of the purchase price to such above or below market leases based upon the present value of the difference between the contractual lease rate and the estimated market rate.  For below market leases with fixed rate renewals, renewal periods are included in the calculation of below market lease values.  The determination of the discount rate used in the present value calculation is based upon a risk adjusted rate.  This discount rate is a significant factor in determining the market valuation which requires our evaluation of subjective factors such as market knowledge, economics, demographics, location, visibility, age and physical condition of the property.

Impairment of Long-Lived Assets

Our investment properties, including developments in progress, are reviewed for potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  Impairment indicators are assessed separately for each property and include, but are not limited to, the property’s low occupancy rate, difficulty in leasing space and financially troubled tenants.  Impairment indicators for developments in progress are assessed by project and include, but are not limited to, significant changes in project completion dates, development costs and market factors.

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If an indicator of potential impairment exists, the asset would be tested for recoverability by comparing its carrying value to the estimated future undiscounted operating cash flows, which is based upon many factors which require us to make difficult, complex or subjective judgments.  Such assumptions include, but are not limited to, projecting vacancy rates, rental rates, operating expenses, lease terms, tenant financial strength, economic factors, demographics, property location, capital expenditures, holding period, capitalization rates and sales value.  An investment property is considered to be impaired when the estimated future undiscounted operating cash flows are less than its carrying value.

Our investments in unconsolidated joint ventures are reviewed for potential impairment, in addition to impairment evaluations of the individual assets underlying these investments, whenever events or changes in circumstances warrant such an evaluation.  To determine whether impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until the carrying value is fully recovered.

To the extent an impairment has occurred, the excess of the carrying value of the asset over its estimated fair value is recorded as a provision for impairment.  

Cost Capitalization, Depreciation and Amortization Policies

Our policy is to review all expenses paid and capitalize any items which are deemed to be an upgrade or a tenant improvement.  These costs are included in the investment properties classification as an addition to buildings and improvements.

Depreciation expense is computed using the straight-line method.  Buildings and improvements are depreciated based upon estimated useful lives of 30 years for buildings and associated improvements and 15 years for site improvements and most other capital improvements.  Acquired in-place lease value, customer relationship value, if any, other leasing costs and tenant improvements are amortized on a straight-line basis over the life of the related lease as a component of depreciation and amortization expense.  The portion of the purchase price allocated to acquired above market lease intangibles and acquired below market lease intangibles are amortized on a straight-line basis over the life of the related lease as an adjustment to net rental income and over the respective renewal period for below market leases with fixed renewal rates.  Renewal periods are excluded for amortization periods on above market lease inta ngibles.

Loss on Lease Terminations

In situations in which a lease or leases associated with a significant tenant have been or are expected to be terminated early, we evaluate the remaining useful lives of depreciable or amortizable assets in the asset group related to the lease that will be terminated (i.e., tenant improvements, above and below market lease intangibles, in-place lease intangibles, and leasing commissions).  Based upon consideration of the facts and circumstances of the termination, we may write-off or accelerate the depreciation and amortization associated with the applicable asset group.  If we conclude that a write-off of the asset group is appropriate, such charges are reported in the consolidated statements of operations and other comprehensive loss as “Loss on lease terminations.” 

Investment Properties Held For Sale

In determining whether to classify an investment property as held for sale, we consider whether: (i) management has committed to a plan to sell the investment property; (ii) the investment property is available for immediate sale in its present condition; (iii) we have initiated a program to locate a buyer; (iv) we believe that the sale of the investment property is probable; (v) we have received a significant non-refundable deposit for the purchase of the investment property; (vi) we are actively marketing the investment property for sale at a price that is reasonable in relation to its current value, and (vii) actions required for us to complete the plan indicate that it is unlikely that any significant changes will be made.

If all of the above criteria are met, we classify the investment property as held for sale.  When these criteria are met, we suspend depreciation (including depreciation for tenant improvements and building improvements) and amortization of acquired in-place lease value and we record the investment property held for sale at the lower of cost or net realizable value.  The assets and liabilities associated with those investment properties that are held for sale are classified separately on the consolidated balance sheets for the most recent reporting period.  Additionally, if the operations and cash flows of the property have been eliminated from ongoing operations and we don’t have significant continuing involvement in the operations of the property, then the operations for the periods presented are classified on the consolidated statements of operations and other comprehensive loss as discontinued operations for a ll periods presented.

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Partially-Owned Entities

If we determine that we are an owner in a variable interest entity (VIE) and we hold a controlling financial interest, then we will consolidate the entity as the primary beneficiary.  For partially-owned entities determined not to be a VIE, we analyze rights held by each partner to determine which would be the consolidating party.  We generally consolidate entities (in the absence of other factors when determining control) when we have over a 50% ownership interest in the entity.  We assess our interests in variable interest entities on an ongoing basis to determine whether or not we are a primary beneficiary.  However, we also evaluate who controls the entity even in circumstances in which we have greater than a 50% ownership interest.  If we do not control the entity due to the lack of decision-making abilities, we will not consolidate the entity.

Marketable Securities

Investments in marketable securities are classified as “available for sale” and accordingly are carried at fair value, with unrealized gains and losses reported as a separate component of shareholders’ equity.  Declines in the value of these investments in marketable securities that management determines are other-than-temporary are recorded as recognized gain (loss) on marketable securities on the consolidated statement of operations and other comprehensive loss.

To determine whether an impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment until a market price recovery and consider whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary, amongst other things.  Evidence considered in this assessment includes the nature of the investment, the reasons for the impairment (i.e. credit or market related), the severity and duration of the impairment, changes in value subsequent to the end of the reporting period and forecasted performance of the investee.  All available information is considered in making this determination with no one factor being determinative.

Allowance for Doubtful Accounts

We periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under their lease agreements.  We also maintain an allowance for receivables arising from the straight-lining of rents.  This receivable arises from revenue recognized in excess of amounts currently due under the lease agreements.  Management exercises judgment in establishing these allowances and considers payment history and current credit status in developing these estimates.

Derivative and Hedging Activities

We adopted accounting guidance as of January 1, 2009 which amends and expands the disclosure requirements related to derivative instruments and hedging activities with the intent to provide users of financial statements with an enhanced understanding of (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for, and (c) how derivative instruments and the related hedged items affect an entity’s financial position, financial performance and cash flows.  The guidance requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit risk related contingent features in derivative instruments.

All derivatives are recorded on the consolidated balance sheets at their fair values within “Other assets,” or “Other liabilities.”  On the date that we enter into a derivative, we may designate the derivative as a hedge against the variability of cash flows that are to be paid in connection with a recognized liability.  Subsequent changes in the fair value of a derivative designated as a cash flow hedge that is determined to be highly effective are recorded in other comprehensive loss until earnings are affected by the variability of cash flows of the hedged transactions.  Any hedge ineffectiveness or changes in the fair value for any derivative not designated as a hedge is reported in net loss.  We do not use derivatives for trading or speculative purposes.

Revenue Recognition

We commence revenue recognition on our leases based on a number of factors.  In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset.  Generally, this occurs on the lease commencement date.  The determination of who is the owner, for accounting purposes, of the tenant improvements determines the nature of the leased asset and when revenue recognition under a lease begins.  If we are the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space and revenue

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recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete.  If we conclude we are not the owner, for accounting purposes, of the tenant improvements (the lessee is the owner), then the leased asset is the unimproved space and any tenant improvement allowances funded under the lease are treated as lease incentives which reduce revenue recognized over the term of the lease.  In these circumstances, we begin revenue recognition when the lessee takes possession of the unimproved space for the lessee to construct their own improvements.  We consider a number of different factors to evaluate whether we or the lessee are the owner of the tenant improvements for accounting purposes.  These factors include:

·

whether the lease stipulates how and on what a tenant improvement allowance may be spent;

·

whether the tenant or landlord retains legal title to the improvements;

·

the uniqueness of the improvements;

·

the expected economic life of the tenant improvements relative to the length of the lease;

·

who constructs or directs the construction of the improvements, and

·

whether the tenant or landlord is obligated to fund cost overruns.

The determination of who owns the tenant improvements, for accounting purposes, is subject to significant judgment.  In making that determination, we consider all of the above factors.  No one factor, however, necessarily establishes its determination.  

Rental income is recognized on a straight-line basis over the term of each lease.  The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease is recorded as deferred rent receivable and is included as a component of “Accounts and notes receivable” in the consolidated balance sheets.

Reimbursements from tenants for recoverable real estate taxes and operating expenses are accrued as revenue in the period the applicable expenditures are incurred.  We make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period.

We record lease termination income if there is a signed termination letter agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and collectibility is reasonably assured.  Upon early lease termination, we provide for losses related to recognized tenant specific intangibles and other assets or adjust the remaining useful life of the assets if determined to be appropriate.  

Our policy for percentage rental income is to defer recognition of contingent rental income (i.e. purchase/excess rent) until the specified target (i.e. breakpoint) that triggers the contingent rental income is achieved.  

In conjunction with certain acquisitions, we receive payments under master lease agreements pertaining to certain non-revenue producing spaces either at the time of, or subsequent to, the purchase of these properties.  Upon receipt of the payments, the receipts are recorded as a reduction in the purchase price of the related properties rather than as rental income.  These master leases were established at the time of purchase in order to mitigate the potential negative effects of loss of rent and expense reimbursements.  Master lease payments are received through a draw of funds escrowed at the time of purchase and generally cover a period from three months to three years.  These funds may be released to either us or the seller when certain leasing conditions are met.

Profits from sales of real estate are not recognized under the full accrual method unless a sale is consummated; the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; our receivable, if applicable, is not subject to future subordination; we have transferred to the buyer the usual risks and rewards of ownership, and we do not have substantial continuing involvement with the property.

Impact of Recently Issued Accounting Pronouncements

Effective January 1, 2009, companies that decrease their ownership in a subsidiary that involves in-substance real estate should account for the transaction under the guidance for sales of real estate. The transfer of our 23% interest in IW JV to Inland Equity for $50,000 was accounted for as a financing transaction and is reflected in “Co-venture obligation” on our consolidated balance sheets.

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Effective January 1, 2010, companies that issue a portion of their distributions to shareholders in stock should account for the stock portion that allows the shareholder to elect to receive cash or shares with potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate as a share issuance, which is to be reflected in earnings per share prospectively.  This guidance did not have a material effect on our consolidated financial statements.

Effective January 1, 2010, the analysis for identifying the primary beneficiary of a VIE has been simplified by replacing the previous quantitative-based analysis with a framework that is based more on qualitative judgments.  The analysis requires the primary beneficiary of a VIE to be identified as the party that both (a) has the power to direct the activities of a VIE that most significantly impact its economic performance and (b) has an obligation to absorb losses or a right to receive benefits that could potentially be significant to the VIE.  Although the amendment significantly affects the overall consolidation analysis under previously issued guidance, the adoption on January 1, 2010 did not have a material impact on the consolidated financial statements.  

Effective January 1, 2010, companies are required to separately disclose the amounts of significant transfers of assets and liabilities into and out of Level 1, Level 2 and Level 3 of the fair value hierarchy and the reasons for those transfers.  Companies must also develop and disclose their policy for determining when transfers between levels are recognized. In addition, companies are required to provide fair value disclosures for each class rather than each major category of assets and liabilities.  For fair value measurements using significant other observable inputs (Level 2) or significant unobservable inputs (Level 3), companies are required to disclose the valuation technique and the inputs used in determining fair value for each class of assets and liabilities.  This guidance did not have a material effect on our consolidated financial statements.

Effective January 1, 2011, companies will be required to separately disclose purchases, sales, issuances and settlements on a gross basis in the reconciliation of recurring Level 3 fair value measurements.  We do not expect this will have a material effect on our consolidated financial statements.

Effective January 1, 2011, public companies that enter into a business combination will be required to disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only.  In addition, the supplemental pro forma disclosures will be expanded.  If we enter into a business combination, we will comply with the disclosure requirements of this guidance.

Subsequent Events

During the period from January 1, 2011 through the date of this filing we:

·

amended and restated our existing credit agreement increasing the aggregate amount to $585,000, consisting of a $435,000 senior secured revolving line of credit and a $150,000 secured term loan with a number of financial institutions;

·

filed a registration statement on Form S-11 with the SEC regarding a proposed public offering of our common stock, and

·

filed a request for a closing agreement from the IRS, whereby the IRS would agree that our dividends paid deduction for the taxable years 2004 through 2006, the years for which we had positive taxable income, was sufficient for us to qualify for taxation as a REIT.  The IRS is currently evaluating our request and continues to move it through its review process (see Note 13 to the consolidated financial statements).

On February 16, 2011, Borders, a national retailer, filed for bankruptcy under Chapter 11.  As of December 31, 2010, Borders leased approximately 220,000 square feet of space from us at 10 locations, which leases represented approximately $2,600 of ABR.  In addition, Borders leased approximately 28,000 square feet of space at one of our unconsolidated joint venture properties, which represented $344 of ABR.  Borders has informed us that it intends to close stores at five locations where it leased space from us, representing approximately 115,000 square feet of GLA and $1,119 of ABR as of December 31, 2010.  We evaluated our exposure to Borders as of December 31, 2010 and recorded a write-off of Tenant Related Deferred Charges in the amount of $2,777 at those five locations.

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Inflation

For our multi-tenant shopping centers, inflation is likely to increase rental income from leases to new tenants and lease renewals, subject to market conditions.  Our rental income and operating expenses for those properties owned, or expected to be owned and operated under net leases, are not likely to be directly affected by future inflation, since rents are or will be fixed under those leases and property expenses are the responsibility of the tenants.  The capital appreciation of single-user net lease properties is likely to be influenced by interest rate fluctuations.  To the extent that inflation determines interest rates, future inflation may have an effect on the capital appreciation of single-user net lease properties.  As of December 31, 2010, we owned 109 single-user properties, of which 93 are net lease properties.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

We may be exposed to interest rate changes primarily as a result of long-term debt used to maintain liquidity and fund capital expenditures and expansion of our real estate investment portfolio and operations.  Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs.  To achieve our objectives we borrow primarily at fixed rates or variable rates with the lowest margins available and in some cases, with the ability to convert variable rates to fixed rates.

With regard to variable-rate financing, we assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities.  We maintain risk management control systems to monitor interest rate cash flow risk attributable to both of our outstanding or forecasted debt obligations as well as our potential offsetting hedge positions.  The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in interest rates on our future cash flows.

We may use additional derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our properties.  To the extent we do, we are exposed to credit risk and market risk.  Credit risk is the failure of the counterparty to perform under the terms of the derivative contract.  When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk for us.  When the fair value of a derivative contract is negative, we owe the counterparty and, therefore, we generally are not exposed to the credit risk of the counterparty.  It is our policy to enter into these transactions with the same party providing the financing, with the right of offset.  Alternatively, we will minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties.  Market risk is the adverse effect on the value of a financial instrument that results from a change in interest rates.  The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

The carrying amount of our mortgages payable, notes payable, line of credit and co-venture obligation is approximately $28,888 lower than its fair value as of December 31, 2010.

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Debt Maturities

Our interest rate risk is monitored using a variety of techniques. The table below presents, as of December 31, 2010, the scheduled maturities of mortgages payable, notes payable, margin payable and the line of credit and weighted average interest rates by year to evaluate the expected cash flows and sensitivity to interest rate changes, but does not reflect the impact of any 2011 debt activity.

				2011		2012		2013		2014		2015		Thereafter		Total		Fair Value
Maturing debt (a) :
	Fixed rate debt:
	Mortgages payable (b)		$	646,060	$	411,493	$	305,913	$	219,832	$	468,143	$	1,283,343	$	3,334,784	$	3,364,801
	Notes payable			-		-		13,900		-		-		125,000		138,900		149,067
	Total fixed rate debt		$	646,060	$	411,493	$	319,813	$	219,832	$	468,143	$	1,408,343	$	3,473,684	$	3,513,868
	Variable rate debt:
	Mortgages payable		$	15,987	$	88,170	$	-	$	-	$	-	$	-	$	104,157	$	104,157
	Line of Credit			154,347		-		-		-		-		-		154,347		154,347
	Margin payable			10,017		-		-		-		-		-		10,017		10,017
	Total variable rate debt			180,351		88,170		-		-		-		-		268,521		268,521
Total maturing debt			$	826,411	$	499,663	$	319,813	$	219,832	$	468,143	$	1,408,343	$	3,742,205	$	3,782,389
Weighted average interest
	rate on debt:
	Fixed rate debt			5.43%		5.46%		5.55%		7.17%		5.78%		7.16%
	Variable rate debt			5.16%		4.00%		-		-		-		-
	Total			5.37%		5.20%		5.55%		7.17%		5.78%		7.16%
(a)		The debt maturity table does not include any premiums or discounts, of which $17,534 and $(2,502), net of accumulated amortization, respectively, is outstanding as of December 31, 2010.
(b)		Includes $67,504 of variable rate debt that was swapped to a fixed rate.

The maturity table excludes other financings and co-venture obligations (see Notes 1 and 10 to the consolidated financial statements).  The maturity table also excludes accelerated principal payments that may be required as a result of covenants or conditions included in certain loan agreements.  In these cases, the total outstanding mortgage payable is included in the year corresponding to the loan maturity date.  The maturity table includes $123,198 of mortgages payable that had matured as of December 31, 2010 in the 2011 column.   

We had $268,521 of variable-rate debt with a weighted average interest rate of 4.78% at December 31, 2010.  An increase in the variable interest rate on this debt constitutes a market risk.  If interest rates increase by 1%, based on debt outstanding as of December 31, 2010, interest expense would increase by approximately $2,685 on an annualized basis.

The table incorporates only those interest rate exposures that existed as of December 31, 2010.  It does not consider those interest rate exposures or positions that could arise after that date.  The information presented herein is merely an estimate and has limited predictive value.  As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on the interest rate exposures that arise during the period, our hedging strategies at that time and future changes in the level of interest rates.

Equity Price Risk

We are exposed to equity price risk as a result of our investments in marketable securities.  Equity price risk changes as the volatility of equity prices changes or the values of corresponding equity indices change.

Other-than-temporary impairments were none, $24,831 and $160,327 for the years ended December 31, 2010, 2009 and 2008, respectively.  These impairments resulted from declines in the fair value of our REIT stock investments that we considered to be other-than-temporary.  At this point in time, certain of our investments continue to generate dividend income while other investments of ours have ceased generating dividend income or are doing so at reduced rates.  As the equity market has begun to recover, we have been able to sell some marketable securities at prices in excess of our current book values.  However, if our stock positions do not continue to recover in 2011, we could take additional other-than-temporary impairments, which could be material to our operations.

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As of December 31, 2010, our investment in marketable securities totaled $34,230, which included $22,106 of accumulated unrealized gain.  In the event that the value of our marketable securities declined by 50%, our investment would be reduced to $17,115 and, if we then sold all of our marketable securities at this value, we would recognize a gain on marketable securities of $4,991.  For the year ended December 31, 2010, our cash flows from operating activities included $3,475 that we received as distributions on our marketable securities.  We could lose some or all of these cash flows if these distributions were reduced or eliminated in the future.  Because all of our marketable securities are equity securities, the issuers of these securities could determine to reduce or eliminate these distributions at any time in their discretion.

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ITEM 8.  Consolidated Financial Statements and Supplementary Data

Index

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Financial Statements

Notes to Consolidated Financial Statements

70

Valuation and Qualifying Accounts (Schedule II)

107

Real Estate and Accumulated Depreciation (Schedule III)

108

Schedules not filed:

All schedules other than the two listed in the Index have been omitted as the required information is either not applicable or the information is already presented in the consolidated financial statements or related notes thereto.

60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Inland Western Retail Real Estate Trust, Inc.:

We have audited the accompanying consolidated balance sheets of Inland Western Retail Real Estate Trust, Inc., and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations and other comprehensive loss, equity, and cash flows for each of the two years in the period ended December 31, 2010. Our audits also included the financial statement schedules listed in the Table of Contents at Item 15. These financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Inland Western Retail Real Estate Trust, Inc., and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, on January 1, 2009, the Company changed its method of accounting for noncontrolling interests and retrospectively adjusted all periods presented in the consolidated financial statements.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 23, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte & Touche LLP

Chicago, Illinois

February 23, 2011

61

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

Inland Western Retail Real Estate Trust, Inc.:

We have audited the accompanying consolidated statements of operations and other comprehensive loss, equity, and cash flows of Inland Western Retail Real Estate Trust, Inc. (the Company) and subsidiaries for the year ended December 31, 2008. In connection with our audit of the consolidated financial statements, we have also audited the 2008 information in financial statement schedules II and III.  These consolidated financial statements and financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of the operations and cash flows of Inland Western Retail Real Estate Trust, Inc. and subsidiaries for the year ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.  Also in our opinion, the 2008 information in the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in notes 1, 2, 3, 12, 13, and 14 to the consolidated financial statements, Inland Western Retail Real Estate Trust, Inc. and subsidiaries retrospectively applied certain reclassifications associated with discontinued operations and upon the adoption of an accounting standard related to noncontrolling interests.

/s/ KPMG LLP

Chicago, Illinois
March 31, 2009, except for notes 1, 2, 3, 12, 13, and 14, which are as of February 23, 2011

62

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Consolidated Balance Sheets

December 31, 2010 and 2009

(in thousands, except per share amounts)

				2010		2009
Assets
Investment properties:
	Land		$	1,375,155	$	1,435,871
	Building and other improvements			5,258,992		5,421,907
	Developments in progress			87,095		112,173
				6,721,242		6,969,951
	Less accumulated depreciation			(1,034,769)		(866,169)
Net investment properties				5,686,473		6,103,782
Cash and cash equivalents				130,213		125,904
Investment in marketable securities				34,230		29,117
Investment in unconsolidated joint ventures				33,465		78,957
Accounts and notes receivable (net of allowances of $9,138
	and $31,014, respectively)			112,915		118,172
Acquired lease intangibles, net				230,046		295,720
Investment properties held for sale				-		46,435
Other assets, net				159,494		130,278
		Total assets	$	6,386,836	$	6,928,365
Liabilities and Equity
Liabilities:
	Mortgages and notes payable		$	3,602,890	$	4,003,985
	Line of credit			154,347		107,000
	Accounts payable and accrued expenses			84,570		73,793
	Distributions payable			26,851		15,657
	Acquired below market lease intangibles, net			92,099		103,134
	Other financings			8,477		11,887
	Co-venture obligation			51,264		50,139
	Liabilities associated with investment properties held for sale			-		34,795
	Other liabilities			69,746		81,729
		Total liabilities		4,090,244		4,482,119
Redeemable noncontrolling interests				527		527
Commitments and contingencies
Equity:
	Preferred stock, $0.001 par value, 10,000 shares authorized,
		none issued or outstanding		-		-
	Common stock, $0.001 par value, 640,000 shares authorized,
		477,345 and 481,743 issued and outstanding at
		December 31, 2010 and 2009, respectively		477		482
	Additional paid-in capital			4,383,281		4,350,484
	Accumulated distributions in excess of earnings			(2,111,138)		(1,920,716)
	Accumulated other comprehensive income			22,282		11,300
		Total shareholders’ equity		2,294,902		2,441,550
	Noncontrolling interests			1,163		4,169
		Total equity		2,296,065		2,445,719
		Total liabilities and equity	$	6,386,836	$	6,928,365

See accompanying notes to consolidated financial statements

63

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Consolidated Statements of Operations and Other Comprehensive Loss

For the Years Ended December 31, 2010, 2009 and 2008

 (in thousands, except per share amounts)

				2010		2009		2008
Revenues:
	Rental income		$	512,237	$	521,467	$	555,027
	Tenant recovery income			115,233		122,047		130,488
	Other property income			16,590		18,804		19,742
	Insurance captive income			2,996		2,261		1,938
Total revenues				647,056		664,579		707,195
Expenses:
	Property operating expenses			106,587		122,586		140,318
	Real estate taxes			86,024		93,253		87,311
	Depreciation and amortization			246,841		248,894		249,996
	Provision for impairment of investment properties			14,430		53,900		51,600
	Loss on lease terminations			13,826		13,735		64,648
	Insurance captive expenses			3,392		3,655		2,874
	General and administrative expenses			18,119		21,191		19,997
Total expenses				489,219		557,214		616,744
Operating income				157,837		107,365		90,451
Dividend income				3,472		10,132		24,010
Interest income				740		1,483		4,329
Loss on partial sales of investment properties				(385)		-		-
Equity in income (loss) of unconsolidated joint ventures				2,025		(11,299)		(4,939)
Interest expense				(260,950)		(234,077)		(210,108)
Co-venture obligation expense				(7,167)		(597)		-
Recognized gain (loss) on marketable securities, net				4,007		18,039		(160,888)
Impairment of goodwill				-		-		(377,916)
Impairment of investment in unconsolidated entity				-		-		(5,524)
Impairment of notes receivable				-		(17,322)		-
Gain (loss) on interest rate locks				-		3,989		(16,778)
Other expense				(3,531)		(9,599)		(1,062)
Loss from continuing operations				(103,952)		(131,886)		(658,425)
Discontinued operations:
	Operating loss			(14,561)		(9,906)		(24,788)
	Gain on sales of investment properties			23,806		26,383		-
Income (loss) from discontinued operations				9,245		16,477		(24,788)
Net loss				(94,707)		(115,409)		(683,213)
Net (income) loss attributable to noncontrolling interests				(1,136)		3,074		(514)
Net loss attributable to Company shareholders			$	(95,843)	$	(112,335)	$	(683,727)
(Loss) earnings per common share-basic and diluted:
	Continuing operations		$	(0.22)	$	(0.27)	$	(1.43)
	Discontinued operations			0.02		0.04		0.01
Net loss per common share attributable to Company shareholders			$	(0.20)	$	(0.23)	$	(1.42)
Net loss			$	(94,707)	$	(115,409)	$	(683,213)
Other comprehensive loss:
	Net unrealized gain (loss) on derivative instruments			1,247		1,696		(5,516)
	Net unrealized gain (loss) on marketable securities			13,742		35,594		(115,716)
	Reversal of unrealized (gain) loss to recognized (gain)
		loss on marketable securities, net		(4,007)		(18,039)		160,888
Comprehensive loss				(83,725)		(96,158)		(643,557)
Comprehensive (income) loss attributable to noncontrolling
	interests			(1,136)		3,074		(514)
Comprehensive loss attributable to Company shareholders			$	(84,861)	$	(93,084)	$	(644,071)
Weighted average number of common shares
	outstanding-basic and diluted			483,743		480,310		481,442

See accompanying notes to consolidated financial statements

64

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Consolidated Statements of Equity

For the Years Ended December 31, 2010, 2009 and 2008

 (in thousands, except per share amounts)

								Accumulated		Accumulated
						Additional		Distributions		Other		Total
				Common		Paid-in		in Excess of		Comprehensive		Shareholders’		Noncontrolling		Total
		Shares		Stock		Capital		Net Loss		Income (Loss)		Equity		Interests		Equity
Balance at January 1, 2008		484,921	$	485	$	4,386,703	$	(740,816)	$	(47,607)	$	3,598,765	$	2,230	$	3,600,995
Net (loss) income (excluding net loss of $32
	attributable to redeemable noncontrolling interests)	-		-		-		(683,727)		-		(683,727)		482		(683,245)
Net unrealized loss on derivative instruments		-		-		-		-		(5,516)		(5,516)		-		(5,516)
Net unrealized loss on marketable securities		-		-		-		-		(115,716)		(115,716)		-		(115,716)
Reversal of unrealized loss to recognized loss
	on marketable securities, net	-		-		-		-		160,888		160,888		-		160,888
Contributions from noncontrolling interests		-		-		-		-		-		-		1,011		1,011
Distributions declared ($0.64 per weighted average
	number of common shares outstanding)	-		-		-		(308,798)		-		(308,798)		-		(308,798)
Distribution reinvestment program (DRP)		15,360		15		153,585		-		-		153,600		-		153,600
Share repurchase program (SRP)		(22,715)		(23)		(227,133)		-		-		(227,156)		-		(227,156)
Stock based compensation expense		-		-		8		-		-		8		-		8
Balance at December 31, 2008		477,566	$	477	$	4,313,163	$	(1,733,341)	$	(7,951)	$	2,572,348	$	3,723	$	2,576,071
Net (loss) income (excluding net loss of $3,332
	attributable to redeemable noncontrolling interests)	-	$	-	$	-	$	(112,335)	$	-	$	(112,335)	$	258	$	(112,077)
Net unrealized gain on derivative instruments		-		-		-		-		1,696		1,696		-		1,696
Net unrealized gain on marketable securities		-		-		-		-		35,594		35,594				35,594
Reversal of unrealized gain to recognized gain
	on marketable securities, net	-		-		-		-		(18,039)		(18,039)		-		(18,039)
Contributions from noncontrolling interests		-		-		-		-		-		-		188		188
Distributions declared ($0.16 per weighted average
	number of common shares outstanding)	-		-		-		(75,040)		-		(75,040)		-		(75,040)
DRP		4,177		5		37,297		-		-		37,302		-		37,302
Stock based compensation expense		-		-		24		-		-		24		-		24
Balance at December 31, 2009		481,743	$	482	$	4,350,484	$	(1,920,716)	$	11,300	$	2,441,550	$	4,169	$	2,445,719

See accompanying notes to consolidated financial statements

65

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Consolidated Statements of Equity

(Continued)

For the Years Ended December 31, 2010, 2009 and 2008

 (in thousands, except per share amounts)

								Accumulated		Accumulated
						Additional		Distributions		Other		Total
				Common		Paid-in		in Excess of		Comprehensive		Shareholders’		Noncontrolling		Total
		Shares		Stock		Capital		Net Loss		Income (Loss)		Equity		Interests		Equity
Net (loss) income (excluding net income of $31
	attributable to redeemable noncontrolling interests)	-	$	-	$	-	$	(95,843)	$	-	$	(95,843)	$	1,105	$	(94,738)
Net unrealized gain on derivative instruments		-		-		-		-		1,247		1,247		-		1,247
Net unrealized gain on marketable securities		-		-		-		-		13,742		13,742		-		13,742
Reversal of unrealized gain to recognized gain
	on marketable securities, net	-		-		-		-		(4,007)		(4,007)		-		(4,007)
Contributions from noncontrolling interests		-		-		-		-		-		-		151		151
De-consolidation of variable interest entity		-		-		-		-		-		-		(4,262)		(4,262)
Distributions declared ($0.20 per weighted average
	number of common shares outstanding)	-		-		-		(94,579)		-		(94,579)		-		(94,579)
DRP		4,601		4		32,727		-		-		32,731		-		32,731
Shares returned from litigation settlement		(9,000)		(9)		9		-		-		-		-		-
Exercise of stock options		1		-		13		-		-		13		-		13
Stock based compensation expense		-		-		48		-		-		48		-		48
Balance at December 31, 2010		477,345	$	477	$	4,383,281	$	(2,111,138)	$	22,282	$	2,294,902	$	1,163	$	2,296,065

See accompanying notes to consolidated financial statements

66

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2010, 2009 and 2008

(in thousands, except per share amounts)

				2010		2009		2008
Cash flows from operating activities:
Net loss			$	(94,707)	$	(115,409)	$	(683,213)
Adjustments to reconcile net loss to net cash provided by
		operating activities (including discontinued operations):
	Depreciation and amortization			248,089		258,592		265,587
	Provision for impairment of investment properties			23,057		64,700		80,000
	Impairment of marketable securities			-		24,831		160,327
	Impairment of goodwill			-		-		377,916
	Impairment of notes receivable			-		17,322		-
	Impairment of investment in unconsolidated entity			-		-		5,524
	Gain on sales of investment properties			(23,806)		(26,383)		-
	Loss on partial sales of investment properties			385		-		-
	Loss on lease terminations			13,826		13,735		67,092
	(Gain) loss on interest rate locks			-		(3,989)		16,778
	Loss on redemption of noncontrolling interests			-		3,447		-
	Non-cash co-venture obligation expense			1,125		139		-
	Amortization of loan fees			12,733		13,295		10,583
	Amortization of acquired above and below market lease intangibles			(1,969)		(2,340)		(2,953)
	Amortization of mortgage debt premium			(1,541)		-		-
	Amortization of discount on debt assumed			509		509		424
	Amortization of lease inducements			60		182		-
	Straight-line rental income			(7,643)		(8,281)		(12,954)
	Straight-line ground rent expense			4,109		3,987		5,186
	Stock based compensation expense			48		24		8
	Equity in (income) loss of unconsolidated joint ventures			(2,025)		11,299		4,939
	Distributions from unconsolidated joint ventures			5,721		4,176		5,168
	Recognized (gain) loss on sale of marketable securities			(4,007)		(42,870)		561
	Provision for bad debt			3,103		9,617		22,910
	Payment of leasing fees			(6,172)		(5,048)		(6,003)
	Costs associated with refinancings			1,190		-		-
Changes in assets and liabilities:
	Accounts receivable, net			8,336		1,467		(5,146)
	Other assets			(184)		2,259		(4,824)
	Accounts payable and accrued expenses			13,313		11,136		4,477
	Other liabilities			(9,478)		13,440		(3,036)
Net cash provided by operating activities				184,072		249,837		309,351
Cash flows from investing activities:
	Purchase of marketable securities			-		(190)		(28,433)
	Proceeds from sale of marketable securities			8,629		125,088		34,789
	Changes in restricted escrows			(22,967)		(38,680)		46,966
	Purchase of investment properties, capital expenditures and tenant improvements			(35,198)		(40,778)		(132,233)
	Proceeds from partial sales of investment properties			48,616		-		-
	Proceeds from sales of investment properties			96,059		172,007		-
	Investment in developments in progress			(3,219)		(15,297)		(73,137)
	Acquired lease intangible assets			-		(6,972)		(22,495)
	Acquired above market lease intangibles			-		(38)		(4,833)
	Acquired below market lease intangibles			-		152		9,741
	Investment in unconsolidated joint ventures			(3,589)		(2,879)		(3,427)
	Return of escrowed funds from unconsolidated joint venture			65,240		-		-
	Payments received under master lease agreements			789		1,231		3,067
	Funding of notes receivable			-		-		(12,744)
	Payoff of notes receivable			40		62		4,184
Net cash provided by (used in) investing activities			$	154,400	$	193,706	$	(178,555)

See accompanying notes to consolidated financial statements

67

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Consolidated Statements of Cash Flows

(Continued)

For the Years Ended December 31, 2010, 2009 and 2008

 (in thousands, except per share amounts)

				2010		2009		2008
Cash flows from financing activities:
	Shares repurchased through SRP		$	-	$	-	$	(227,156)
	Proceeds from margin debt related to marketable securities			22,860		29,750		18,348
	Payoff of margin debt related to marketable securities			(12,843)		(86,090)		(70,048)
	Proceeds from mortgages and notes payable			737,890		974,938		224,172
	Principal payments on mortgages and notes payable			(32,646)		(5,428)		(2,560)
	Repayments of mortgages and notes payable			(1,018,351)		(1,152,767)		(57,820)
	Proceeds from line of credit			90,000		30,000		275,000
	Payoff of line of credit			(42,653)		(148,000)		(125,000)
	Payment of rate lock deposits			(12,290)		-		(7,650)
	Refund of rate lock deposits			12,290		5,209		-
	Payment of loan fees and deposits			(11,498)		(31,376)		(3,890)
	Exercise of stock options			13		-		-
	Payment of offering costs			(575)		-		-
	Distributions paid, net of DRP			(50,654)		(47,651)		(155,592)
	Distributions to redeemable noncontrolling interests			(31)		(32)		(31)
	Redemption of redeemable noncontrolling interests			-		(1,548)		-
	Contributions from noncontrolling interests			151		188		1,011
	Contributions from redeemable noncontrolling interests			-		-		20
	Repayment of other financings			(3,410)		(55,999)		-
	Proceeds from other financings			-		-		4,207
	Proceeds from co-venture obligation			-		50,000		-
Net cash used in financing activities				(321,747)		(438,806)		(126,989)
Net increase in cash and cash equivalents				16,725		4,737		3,807
Cash and cash equivalents, at beginning of year				125,904		121,167		117,360
Cash decrease due to deconsolidation of variable interest entity				(12,416)		-		-
Cash and cash equivalents, at end of year			$	130,213	$	125,904	$	121,167
Supplemental cash flow disclosure, including non-cash activities:
	Cash paid for interest, net of interest capitalized		$	248,576	$	222,573	$	229,647
	Distributions payable		$	26,851	$	15,657	$	25,570
	Distributions reinvested		$	32,731	$	37,302	$	153,600
	Accrued offering costs		$	309	$	-	$	-
	Purchase of investment properties:
		Land, building and other improvements	$	(35,198)	$	(40,778)	$	(203,315)
		Assumption of mortgages payable		-		-		56,500
		Conversion of investment in joint venture to investment property		-		-		2,179
		Conversion of notes receivable to investment property		-		-		16,347
		Other financings		-		-		-
		Mortgage discount		-		-		(3,944)
			$	(35,198)	$	(40,778)	$	(132,233)
	Developments in progress placed in service		$	28,312	$	35,126	$	84,629
	Developments payable		$	499	$	485	$	4,339
	Forgiveness of mortgage debt		$	50,831	$	-	$	-
	Shares of common stock returned as a result of litigation settlement			9,000

See accompanying notes to consolidated financial statements

68

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Consolidated Statements of Cash Flows

(Continued)

For the Years Ended December 31, 2010, 2009 and 2008

 (in thousands, except per share amounts)

		2010		2009		2008
Proceeds from sales of investment properties:
Land	$	36,600	$	50,846	$	-
Building and other improvements, net of accumulated depreciation		71,891		237,789		-
Accounts and notes receivable		474		2,425		-
Acquired lease intangibles and other assets		(4,883)		20,972		-
Mortgages and notes payable assumption		-		(160,489)		-
Forgiveness of mortgage debt		(31,756)		-		-
Acquired below market lease intangibles and other liabilities		(73)		(5,919)		-
Gain on sales of investment properties		23,806		26,383		-
	$	96,059	$	172,007	$	-
Proceeds from partial sales of investment properties:
Land	$	37,377	$	-	$	-
Building and other improvements, net of accumulated depreciation		113,440		-		-
Accounts and notes receivable		2,062		-		-
Acquired lease intangibles and other assets		(2,350)		-		-
Mortgages and notes payable assumption		(97,888)		-		-
Acquired below market lease intangibles and other liabilities		(3,640)		-		-
Loss on partial sales of investment properties		(385)		-		-
	$	48,616	$	-	$	-
Redemption of redeemable noncontrolling interests:
Redeemable noncontrolling interests	$	-	$	15,426	$	-
Land		-		(11,488)		-
Building and other improvements, net of accumulated depreciation		-		-		-
Investment in unconsolidated joint ventures		-		-		-
Restricted cash		-		(2,390)		-
Acquired lease intangibles and other assets		-		-		-
Mortgages and notes payable		-		-		-
Acquired below market lease intangibles and other liabilities		-		-		-
	$	-	$	1,548	$	-
Deconsolidation of variable interest entity:
Investment in unconsolidated joint ventures	$	7,230	$	-	$	-
Other assets, net		(6,386)		-		-
Accounts payable and accrued expenses		124		-		-
Other liabilities		7,186
Noncontrolling interests		4,262		-		-
Cash decrease due to deconsolidation of variable interest entity	$	12,416	$	-	$	-

See accompanying notes to consolidated financial statements

69

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

(1)  Organization and Basis of Presentation

Inland Western Retail Real Estate Trust, Inc. (the “Company”) was formed on March 5, 2003 to acquire and manage a diversified portfolio of real estate, primarily multi-tenant shopping centers and single-user net lease properties.

All amounts in the notes to the consolidated financial statements are stated in thousands with the exception of per share amounts, square foot amounts, number of properties, number of states, number of leases and number of employees.

The Company issued a total of 459,484 shares of its common stock at $10.00 per share, resulting in gross proceeds of $4,595,193.  In addition, as of December 31, 2010, the Company had issued 70,683 shares through its DRP at prices ranging from $6.85 to $10.00 per share for gross proceeds of $675,503 and had repurchased a total of 43,823 shares through its SRP (suspended as of November 19, 2008) at prices ranging from $9.25 to $10.00 per share for an aggregate cost of $432,487.  During September 2010, one thousand five hundred shares were issued through the exercise of stock options at a price of $8.95 per share for gross proceeds of $13. In addition, nine million shares of common stock were transferred back to the Company in December 2010 from shares of common stock issued to the owners of certain entities that were acquired by the Company in its internalization transaction in conjunction with the litigation settlement.  See Note 17 for further details on the litigation settlement.  As a result, the Company had total shares outstanding of 477,345 and had realized total net offering proceeds of $4,838,222 as of December 31, 2010.

On November 15, 2007, pursuant to an agreement and plan of merger approved by its shareholders on November 13, 2007, the Company acquired, through a series of mergers, four entities affiliated with its former sponsor, Inland Real Estate Investment Corporation, which provided business management/advisory and property management services to the Company. Shareholders of the acquired companies received an aggregate of 37,500 shares of the Company’s common stock, valued under the merger agreement at $10.00 per share.  In December 2010, certain of the shareholders returned 9,000 shares of the Company’s common stock in connection with the settlement of a lawsuit related to this acquisition.

The Company accounted for the merger transaction as a consummation of a business combination between parties with a pre-existing relationship.  The assets and liabilities of the acquired companies were recorded at their estimated fair value at the date of the transaction.  The purchase price in excess of the fair value of the assets and liabilities of the acquired companies was allocated to goodwill in the amount of $377,916.  In determining the purchase price, an independent third party rendered an opinion on the $10.00 per share value of the shares, as well as the aggregate purchase price of $375,000.  Additional costs totaling $4,019 were also incurred as part of the merger transaction consisting of financial and legal advisory services and accounting and proxy related costs. As part of the merger, the Company assigned values to these tangible and intangible assets at their estimated fair values.  

The Company performed its goodwill impairment analysis using the two step method on an annual basis and whenever events or changes in circumstances indicated that the carrying amount may not be recoverable.  The Company completed its annual goodwill impairment test during the fourth quarter of 2008 and determined that the carrying value exceeded its fair value, indicating potential goodwill impairment existed. Certain unanticipated events occurring primarily in the fourth quarter of 2008 caused the carrying value of goodwill to exceed its fair value. The primary events were the severe dislocations and liquidity disruptions in the credit and equity markets that took place late in 2008 and three significant tenants who declared bankruptcy liquidations during the fourth quarter of 2008 and early in 2009.  As a result of the two step test performed during the fourth quarter of 2008, the Company determined that the entire go odwill balance was impaired and, as such, the Company recorded impairment of $377,916.

The Company has elected to be taxed as a real estate investment trust (REIT) under the Internal Revenue Code of 1986, as amended, or the Code, commencing with the tax year ended December 31, 2003.  The Company believes it qualifies for taxation as a REIT and, as such, the Company generally will not be subject to federal income tax on taxable income that is distributed to shareholders.  If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate tax rates.  However, on January 20, 2011, the Company filed a request for a closing agreement from the Internal Revenue Service, or IRS, whereby the IRS, would agree that the

70

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Company’s dividends paid deduction for the taxable years 2004 through 2006, the years for which it had positive taxable income, was sufficient for the Company to qualify for taxation as a REIT.  The IRS is currently reviewing the Company’s request and continues to move it through its review process (see Note 13).  Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income, property or net worth and federal income and excise taxes on its undistributed income.  The Company has one wholly-owned subsidiary that has elected to be treated as a taxable REIT subsidiary (TRS) for federal income tax purposes.  A TRS is taxed on its taxable income at regular corporate tax rates.  The income tax expense incurred as a result of the TRS did not have a material impact on the Company’s accompanying consolidated financial statements.   ;On November 15, 2007, the Company acquired four qualified REIT subsidiaries.  Their income is consolidated with REIT income for federal and state income tax purposes.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions.  These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.  For example, significant estimates and assumptions have been made with respect to useful lives of assets; capitalization of development and leasing costs; fair value measurements; provision for impairment, including estimates of holding periods, capitalization rates and discount rates (where applicable); provision for income taxes; recoverable amounts of receivables; deferred taxes and initial valuations and related amortization p eriods of deferred costs and intangibles, particularly with respect to property acquisitions.  Actual results could differ from those estimates.

Certain reclassifications as a result of discontinued operations have been made to the 2009 and 2008 consolidated financial statements to conform to the 2010 presentation.  In addition, on January 1, 2009, the Company adopted guidance on noncontrolling interests that required retrospective application, in which all periods presented reflect the necessary changes.

The accompanying consolidated financial statements include the accounts of the Company, as well as all wholly-owned subsidiaries and consolidated joint venture investments.  Wholly-owned subsidiaries generally consist of limited liability companies (LLCs) and limited partnerships (LPs).

The Company’s property ownership as of December 31, 2010 is summarized below:

		Wholly-owned	Consolidated Joint Venture (a)	Unconsolidated Joint Venture (b)
Operating properties		229	55	19
Development properties		1	5	2
(a)	The Company has ownership interests ranging from 25% to 77% in six LLCs or LPs
(b)	The Company has ownership interests ranging from 20% to 96% in three LLCs or LPs

The Company consolidates certain property holding entities and other subsidiaries in which it owns less than a 100% equity interest if it is deemed to be the primary beneficiary in a variable interest entity (VIE), (an entity in which the contractual, ownership, or pecuniary interests change with changes in the fair value of the entity’s net assets, as defined by the Financial Accounting Standards Board (FASB)). The Company also consolidates entities that are not VIEs in which it has financial and operating control in accordance with GAAP.  All significant intercompany balances and transactions have been eliminated in consolidation.  Investments in real estate joint ventures in which the Company has the ability to exercise significant influence, but does not have financial or operating control, are accounted for using the equity method of accounting.  Accordingly, the Company’s share of the income (or loss) of these unconsolidated joint ventures is included in consolidated net (loss) income.

The Company is the controlling member in various consolidated entities.  The organizational documents of these entities contain provisions that require the entities to be liquidated through the sale of their assets upon reaching a future date as specified in each respective organizational document or through put/call arrangements.  As controlling member, the

71

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Company has an obligation to cause these property-owning entities to distribute proceeds of liquidation to the noncontrolling interest partners in these partially-owned entities only if the net proceeds received by each of the entities from the sale of assets warrant a distribution based on the agreements.  Some of the LLC or LP agreements for these entities contain put/call provisions which grant the right to the outside owners and the Company to require each LLC or LP to redeem the ownership interest of the outside owners during future periods.  In instances where outside ownership interests are subject to put/call arrangements requiring settlement for fixed amounts, the LLC or LP is treated as a 100% owned subsidiary by the Company with the amount due to the outside owner reflected as a financing arrangement and included in “Other financings” in the accompanying consolidated balance sheets.  Int erest expense is recorded on such liabilities in amounts equal to the preferential returns due to the outside owners as provided in the LLC or LP agreements.  In instances where outside ownership interests are subject to call arrangements without fixed settlement amounts, the LLC is treated as a 100% owned subsidiary by the Company with the amount due to the outside owner reflected as a financing and included in “Co-venture obligation” in the accompanying consolidated balance sheets.  Expense is recorded on such liabilities in amounts equal to the preferential returns due to the outside owners as provided in the LLC agreement.

In December 2007, the FASB issued accounting guidance on noncontrolling interests in consolidated financial statements, effective for fiscal years beginning on or after December 15, 2008.  The Company adopted the guidance on January 1, 2009.  The guidance defines noncontrolling interest as the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent.  As a result of the adoption of the guidance on noncontrolling interests, the Company retrospectively adjusted all periods presented in the consolidated financial statements for the balances related to the noncontrolling interests associated with the insurance association captive and two consolidated joint venture investments to permanent equity.  Noncontrolling interests associated with the Company’s other consolidated joint venture investments continue to be classified outside of permanent equity as those interests are redeema ble by the Company at the discretion of the noncontrolling interest holder.  The Company made this determination based on an evaluation of the terms in applicable agreements, specifically the redemption provisions.  The amount at which these interests would be redeemed is based on a formula contained in each respective agreement and, as of December 31, 2010 and 2009, was determined to approximate the carrying value of these interests.  Accordingly, no adjustment was made during the years ended December 31, 2010 and 2009.

On the consolidated statements of operations and other comprehensive loss, revenues, expenses and net income or loss from less-than-wholly-owned subsidiaries are reported at the consolidated amounts, including both the amounts attributable to Company shareholders and noncontrolling interests.  Consolidated statements of equity are included in the annual financial statements, including beginning balances, activity for the period and ending balances for shareholders’ equity, noncontrolling interests and total equity.

Below is a table reflecting the activity of the redeemable noncontrolling interests for the years ended December 31, 2010, 2009 and 2008:

		2010		2009		2008
Balance at January 1,	$	527	$	19,317	$	19,296
Redeemable noncontrolling interest income (expense)		31		(3,332)		32
Contributions		-		-		20
Distributions		(31)		(32)		(31)
Redemptions		-		(15,426)		-
Balance at December 31,	$	527	$	527	$	19,317

72

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

During the years ended December 31, 2010 and 2009, the Company paid certain joint venture partners for the redemption of their interests in certain consolidated joint ventures as summarized below:  

Redemption Date	Full or Partial Redemption		Accrued Preferred Return		Amount Included in Other Financings		Total Payment Amount
January 5, 2010	Full	$	20	$	3,410	$	3,430
Redemption Date	Full or Partial Redemption		Accrued Preferred Return		Amount included in Other financings		Total Payment Amount
January 16, 2009	Full	$	-	$	3,410	$	3,410
April 28, 2009	Full		114		5,698		5,812
June 4, 2009	Partial		-		40,539		40,539
June 29, 2009	Full		-		6,352		6,352
Total for the year ended December 31, 2009		$	114	$	55,999	$	56,113

The Company is party to an agreement with an LLC formed as an insurance association captive (the “Captive”), which is wholly-owned by the Company and three related parties, Inland Real Estate Corporation (IREC), Inland American Real Estate Trust, Inc. (IARETI) and Inland Diversified Real Estate Trust, Inc. (IDRETI).  The Captive is serviced by a related party, Inland Risk and Management Services, Inc. for a fee of $25 per quarter.  It has been determined that the Captive is a VIE and, as the Company received the most benefit of all members through November 30, 2010, the Company was deemed to be the primary beneficiary.  Therefore, the Captive was consolidated by the Company through November 30, 2010.  Prior to November 30, 2010, the other members’ interests are reflected as “Noncontrolling interests” in the accompanying consolidated financial statements.  Effective November 3 0, 2010, it was determined that the Company no longer received the most benefit, nor had the highest risk of loss and, therefore, was no longer the primary beneficiary.  As a result, the Captive was deconsolidated and recorded under the equity method of accounting.  As of December 31, 2010, the Company’s interest in the Captive is reflected in “Investment in unconsolidated joint ventures” in the accompanying consolidated balance sheets.  The Company’s share of net income of the Captive for December 2010 is reflected in “Equity in income (loss) of unconsolidated joint ventures” in the accompanying consolidated statements of operations and other comprehensive loss.

The assets of the Captive are restricted to the settlement of liabilities of the Captive.  Similarly, creditors of the Captive do not have recourse to the Company.  Below is a summary of the assets and liabilities of the Captive as of December 31, 2009:

		December 31,
		2009
Cash and cash equivalents	$	10,000
Other assets, net		5,256
Accounts payable and accrued expenses		(34)
Other liabilities		(8,320)

On November 29, 2009, the Company formed IW JV 2009, LLC (IW JV), a wholly-owned subsidiary, and transferred a portfolio of 55 investment properties and the entities which owned them into it.  Subsequently, in connection with a $625,000 debt refinancing transaction, which consisted of $500,000 of mortgages payable and $125,000 of notes payable, on December 1, 2009, the Company raised additional capital of $50,000 from a related party, Inland Equity Investors, LLC (Inland Equity) in exchange for a 23% noncontrolling interest in IW JV.  IW JV, which is controlled by the Company, and therefore consolidated, will continue to be managed and operated by the Company.  Inland Equity is owned by certain individuals, including Daniel L. Goodwin, who beneficially owns more than 5% of the common stock of the Company, and Robert D. Parks, who was the Chairman of the Board of the Company until October 12, 2010 and is the Chairma n of the Board of certain affiliates of The Inland Group, Inc.  The independent directors committee reviewed and recommended approval of this transaction to the Company’s board of directors.

73

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Noncontrolling interests are adjusted for additional contributions by noncontrolling interest holders and distributions to noncontrolling interest holders, as well as the noncontrolling interest holders’ share of the net income or losses of each respective entity.

(2)  Summary of Significant Accounting Policies

Investment Properties: Investment properties are recorded at cost less accumulated depreciation.  Ordinary repairs and maintenance are expensed as incurred.  Expenditures for significant betterments and improvements are capitalized.

The Company allocates the purchase price of each acquired investment property between the estimated fair values of land, building and improvements, acquired above market and below market lease intangibles, in-place lease value, any assumed financing that is determined to be above or below market, the value of customer relationships, if any, and goodwill if determined to meet the definition of a business under the guidance.  The allocation of the purchase price is an area that requires judgment and significant estimates.  Beginning in 2009, transaction costs associated with any acquisitions are expensed as incurred.  In some circumstances, the Company engages independent real estate appraisal firms to provide market information and evaluations that help support the Company’s purchase price allocations; however, the Company is ultimately responsible for the purchase price allocations.  The Company determine s whether any financing assumed is above or below market based upon comparison to similar financing terms at the time of acquisition for similar investment properties.  The Company allocates a portion of the purchase price to the estimated, acquired in-place lease value based on estimated lease execution costs for similar leases, as well as, lost rental payments during an assumed lease-up period when calculating as-if-vacant fair values.  The Company considers various factors, including geographic location and size of the leased space.  The Company also evaluates each significant acquired lease based upon current market rates at the acquisition date and considers various factors, including geographical location, size and location of the leased space within the investment property, tenant profile, and the credit risk of the tenant in determining whether the acquired lease is above or below market.  If an acquired lease is determined to be above or below market, the Company allocates a port ion of the purchase price to such above or below market leases based upon the present value of the difference between the contractual lease rate and the estimated market rate.  For below market leases with fixed rate renewals, renewal periods are included in the calculation of below market lease values.  Renewal periods are excluded for amortization periods on above market lease intangibles.  The determination of the discount rate used in the present value calculation is based upon a risk adjusted rate.  This discount rate is a significant factor in determining the market valuation which requires the Company’s evaluation of subjective factors such as market knowledge, economics, demographics, location, visibility, age and physical condition of the property.

The portion of the purchase price allocated to acquired in-place lease intangibles is amortized on a straight-line basis over the life of the related lease as a component of depreciation and amortization expense.  The Company incurred amortization expense pertaining to acquired in-place lease intangibles of $42,336, $46,409 and $50,063 for the years ended December 31, 2010, 2009 and 2008, respectively.

The portion of the purchase price allocated to acquired above market lease value and acquired below market lease value is amortized on a straight-line basis over the life of the related lease as an adjustment to rental income and over the respective renewal period for below market leases with fixed rate renewals.  Renewal periods are excluded for amortization periods on above market lease intangibles.  Amortization pertaining to the above market lease value of $5,654, $6,307 and $7,156 for the years ended December 31, 2010, 2009 and 2008, respectively, was applied as a reduction to rental income.  Amortization pertaining to the below market lease value $7,623, $8,647 and $9,660 for the years ended December 31, 2010, 2009 and 2008, respectively, was applied as an increase to rental income.

74

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

The following table presents the amortization during the next five years and thereafter related to the acquired in-place lease value and acquired above and below market lease intangibles for properties owned at December 31, 2010:

		2011		2012		2013		2014		2015		Thereafter
Amortization of:
Acquired above market lease intangibles	$	(4,871)	$	(3,625)	$	(3,180)	$	(2,619)	$	(2,122)	$	(6,434)
Acquired below market lease intangibles		6,664		6,085		5,761		5,381		4,934		63,274
Net rental income increase	$	1,793	$	2,460	$	2,581	$	2,762	$	2,812	$	56,840
Acquired in-place lease value	$	39,711	$	37,447	$	33,992	$	24,776	$	16,590	$	54,672

Depreciation expense is computed using the straight-line method.  Buildings and improvements are depreciated based upon estimated useful lives of 30 years for buildings and associated improvements and 15 years for site improvements and most other capital improvements.  Tenant improvements and leasing fees are amortized on a straight-line basis over the life of the related lease as a component of depreciation and amortization expense.

Impairment: The Company’s investment properties, including developments in progress, are reviewedfor potential impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  Impairment indicators are assessed separately for each property and include, but are not limited to, the property’s low occupancy rate, difficulty in leasing space and financially troubled tenants.  Impairment indicators for developments in progress are assessed by project and include, but are not limited to, significant changes in project completion dates, development costs and market factors.

If an indicator of potential impairment exists, the asset would be tested for recoverability by comparing its carrying value to the estimated future undiscounted operating cash flows, which is based upon many factors which requires the Company to make difficult, complex or subjective judgments.  Such assumptions include, but are not limited to, projecting vacancy rates, rental rates, operating expenses, lease terms, tenant financial strength, economic factors, demographics, property location, capital expenditures, holding period, capitalization rates and sales value.  An investment property is considered to be impaired when the estimated future undiscounted operating cash flows are less than its carrying value.

The Company’s investments in unconsolidated joint ventures are reviewed for potential impairment, in addition to impairment evaluations of the individual assets underlying these investments, whenever events or changes in circumstances warrant such an evaluation.  To determine whether impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying value is fully recovered.

To the extent impairment has occurred, the excess of the carrying value of the asset over its estimated fair value is recorded as a provision for impairment of investment properties or investments in unconsolidated joint ventures.

Below is a summary of impairment losses for the years ended December 31, 2010, 2009 and 2008:

		Years Ended December 31,
			2010		2009			2008
Impairment of consolidated properties		$	23,057	$	64,700		$	80,000
Impairment of investment in unconsolidated joint ventures		$	-	$	9,062	(a)	$	9,028	(b)
(a)	Included in "Equity in (loss) income of unconsolidated joint ventures" in the accompanying consolidated statements of operations and other comprehensive loss.
(b)	$3,504 included in "Equity in (loss) income of unconsolidated joint ventures" and $5,524 included in "Impairment of investment in unconsolidated entity" in the accompanying consolidated statements of operations and other comprehensive loss.

Impairment of consolidated investment properties is included in “Provision for impairment of investment properties” on the accompanying consolidated statements of operations and other comprehensive loss, except for $8,627, $10,800, and $28,400 which is included in discontinued operations in 2010, 2009, and 2008, respectively.  The Company’s assessment

75

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

of impairment at December 31, 2010 was based on the most current information available to the Company.  If the conditions mentioned above deteriorate further or if the Company’s plans regarding the Company’s assets change, subsequent tests for impairment could result in additional impairment charges in the future.  The Company can provide no assurance that material impairment charges with respect to the Company’s investment properties and investments in unconsolidated joint ventures will not occur in 2011 or future periods.  In light of the downturn in the general economy and the resulting effect upon real estate market conditions, certain of the Company’s properties may have fair values less than their carrying amounts.  However, based on the Company’s plans with respect to those properties, the Company believes that the carrying amounts are recoverable and therefore, under applicable GAAP guidance, no additional impairments were taken.  Accordingly, the Company will continue to monitor circumstances and events in future periods to determine whether additional impairments are warranted.

Development Projects: The Company capitalizes costs incurred during the development period such as construction, insurance, architectural, legal, interest and other financing costs, and real estate taxes.  At such time as the development is considered substantially complete, those costs included in developments in progress are reclassified to land and building and other improvements.  Development payables of $499 and $485 at December 31, 2010 and 2009, respectively, consist of costs incurred and not yet paid pertaining to these development projects and are included in “Accounts payable and accrued expenses” on the accompanying consolidated balance sheets.  During the years ended December 31, 2010, 2009 and 2008, the Company capitalized interest cost of $286, $1,194 and $7,485, respectively.  

Loss on Lease Terminations:  In situations in which a lease or leases associated with a significant tenant have been, or are expected to be, terminated early, the Company evaluates the remaining useful lives of depreciable or amortizable assets in the asset group related to the lease that will be terminated (i.e., tenant improvements, above and below market lease intangibles, in-place lease intangibles, and leasing commissions).  Based upon consideration of the facts and circumstances of the termination, the Company may write-off the depreciation and amortization associated with the applicable asset group.  If the Company concludes that a write-off of the asset group is appropriate, such charges are reported in the consolidated statements of operations and other comprehensive loss as “Loss on lease terminations.”  The Company recorded loss on lease terminations of $13,826 , $13,735 and $67,092 (including $2,444 reflected as discontinued operations) for the years ended December 31, 2010, 2009 and 2008, respectively.

Investment Properties Held For Sale: In determining whether to classify an investment property as held for sale, the Company considers whether: (i) management has committed to a plan to sell the investment property; (ii) the investment property is available for immediate sale in its present condition; (iii) the Company has initiated a program to locate a buyer; (iv) the Company believes that the sale of the investment property is probable; (v) the Company has received a significant non-refundable deposit for the purchase of the investment property; (vi) the Company is actively marketing the investment property for sale at a price that is reasonable in relation to its current value, and (vii) actions required for the Company to complete the plan indicate that it is unlikely that any significant changes will be made.

If all of the above criteria are met, the Company classifies the investment property as held for sale.  When these criteria are met, the Company suspends depreciation (including depreciation for tenant improvements and building improvements) and amortization of acquired in-place lease value and customer relationship values.  The assets and liabilities associated with those investment properties that are held for sale are classified separately on the consolidated balance sheets for the most recent reporting period.  Additionally, if the operations and cash flows of the property have been eliminated from ongoing operations and the Company does not have significant continuing involvement in the operations of the property, then the operations for the periods presented are classified on the consolidated statements of operations and other comprehensive loss as discontinued operations for all periods presented.  Ther e were no properties classified as held for sale at December 31, 2010 and there was one single-user property classified as held for sale at December 31, 2009.  Refer to Note 3 for more information.

Partially-Owned Entities: If the Company determines that it is an owner in a VIE and it holds a controlling financial interest, then it will consolidate the entity as the primary beneficiary.  For partially-owned entities determined not to be a VIE, the Company analyzes rights held by each partner to determine which would be the consolidating party.  The

76

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Company generally consolidates entities (in the absence of other factors when determining control) when it has over a 50% ownership interest in the entity.  The Company assesses its interests in variable interest entities on an ongoing basis to determine whether or not it is a primary beneficiary.  However, it also evaluates who controls the entity even in circumstances in which it has greater than a 50% ownership interest.  If the Company does not control the entity due to the lack of decision-making abilities, it will not consolidate the entity.

Cash and Cash Equivalents: The Company considers all demand deposits, money market accounts and investments in certificates of deposit and repurchase agreements purchased with a maturity of three months or less, at the date of purchase, to be cash equivalents.  The Company maintains its cash and cash equivalents at various financial institutions.  The combined account balances at one or more institutions periodically exceed the Federal Depository Insurance Corporation (FDIC) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage.  The Company believes that the risk is not significant, as the Company does not anticipate the financial institutions’ non-performance.

Marketable Securities: Investments in marketable securities are classified as “available-for-sale” and accordingly are carried at fair value, with unrealized gains and losses reported as a separate component of shareholders’ equity.  Declines in the value of these investments in marketable securities that the Company determines are other-than-temporary are recorded as recognized loss on marketable securities on the consolidated statements of operations and other comprehensive loss.

To determine whether an impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until a market price recovery and considers whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary, among other things.  Evidence considered in this assessment includes the nature of the investment, the reasons for the impairment (i.e. credit or market related), the severity and duration of the impairment, changes in value subsequent to the end of the reporting period and forecasted performance of the investee.  All available information is considered in making this determination with no one factor being determinative.

Allowance for Doubtful Accounts: The Company periodically evaluates the collectability of amounts due from tenants and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under their lease agreements.  The Company also maintains an allowance for receivables arising from the straight-lining of rents.  These receivables arise from revenue recognized in excess of amounts currently due under the lease agreements.  As stated previously, this also includes allowances for notes receivable.  Management exercises judgment in establishing these allowances on a tenant-specific basis and considers payment history and current credit status in developing these estimates.

Restricted Cash and Escrows: Restricted cash and escrows include funds received by third party escrow agents from sellers pertaining to master lease agreements.  The Company records the third party escrow funds as both an asset and a corresponding liability, until certain leasing conditions are met.  Restricted cash and escrows also consist of lenders’ escrows and funds restricted through other lender agreements and are included as a component of “Other assets” in the accompanying consolidated balance sheets.

Derivative Instruments and Hedging Activities: The Company adopted accounting guidance as of January 1, 2009 which amends and expands the disclosure requirements related to derivative instruments and hedging activities with the intent to provide users of financial statements with an enhanced understanding of (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for, and (c) how derivative instruments and the related hedged items affect an entity’s financial position, financial performance and cash flows.  The guidance requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit risk-related contingent features in derivative instruments.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

All derivatives are recorded on the consolidated balance sheetsat their fair values within “Other assets” or “Other liabilities.”  On the date that the Company enters into a derivative, it may designate the derivative as a hedge against the variability of cash flows that are to be paid in connection with a recognized liability.  Subsequent changes in the fair value of a derivative designated as a cash flow hedge that is determined to be highly effective are recorded in “Accumulated other comprehensive income (loss),” until earnings are affected by the variability of cash flows of the hedged transactions.  Any hedge ineffectiveness or changes in fair value for any derivative not designated as a hedge is reported in “Other expense” on the consolidated statements of operations and other comprehensive loss. & nbsp;The Company uses derivatives to manage differences in the amount, timing and duration of the Company’s known or expected cash payments principally related to certain of the Company’s borrowings.  The Company does not use derivatives for trading or speculative purposes.

Conditional Asset Retirement Obligations: The Company evaluates the potential impact of conditional asset retirement obligations on its consolidated financial statements.  The term conditional asset retirement obligation refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity.  Thus, the timing and/or method of settlement may be conditional on a future event.  Based upon the Company’s evaluation, the accrual of a liability for asset retirement obligations was not warranted as of December 31, 2010 and 2009.

Revenue Recognition: The Company commences revenue recognition on its leases based on a number of factors.  In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset.  Generally, this occurs on the lease commencement date.  The determination of who is the owner, for accounting purposes, of the tenant improvements determines the nature of the leased asset and when revenue recognition under a lease begins.  If the Company is the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete.  If the Company concludes it is not the owner, for accounting purposes, of the tenant improvements (the lessee is the owner), then the lease d asset is the unimproved space and any tenant improvement allowances funded under the lease are treated as lease incentives which reduce revenue recognized over the term of the lease.  In these circumstances, the Company begins revenue recognition when the lessee takes possession of the unimproved space for the lessee to construct their own improvements.  The Company considers a number of different factors to evaluate whether it or the lessee is the owner of the tenant improvements for accounting purposes.  These factors include:

·

whether the lease stipulates how and on what a tenant improvement allowance may be spent;

·

whether the tenant or the Company retains legal title to the improvements;

·

the uniqueness of the improvements;

·

the expected economic life of the tenant improvements relative to the length of the lease;

·

who constructs or directs the construction of the improvements, and

·

whether the tenant or the Company is obligated to fund cost overruns.

The determination of who owns the tenant improvements, for accounting purposes, is subject to significant judgment.  In making that determination, the Company considers all of the above factors.  No one factor, however, necessarily establishes its determination.

Rental income is recognized on a straight-line basis over the term of each lease.  The difference between rental income earned on a straight-line basis and the cash rent due under the provisions of the lease is recorded as deferred rent receivable and is included as a component of “Accounts and notes receivable” in the accompanying consolidated balance sheets.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Reimbursements from tenants for recoverable real estate taxes and operating expenses are accrued as revenue in the period the applicable expenditures are incurred.  The Company makes certain assumptions and judgments in estimating the reimbursements at the end of each reporting period.

The Company records lease termination income if there is a signed termination letter agreement, all of the conditions of the agreement have been met, the tenant is no longer occupying the property and collectability is reasonably assured.  Upon early lease termination, the Company provides for losses related to recognized tenant specific intangibles and other assets or adjusts the remaining useful life of the assets if determined to be appropriate, in accordance with its policy related to loss on lease terminations.

The Company’s policy for percentage rental income is to defer recognition of contingent rental income until the specified target (i.e. breakpoint) that triggers the contingent rental income is achieved.  The Company earnedpercentage rental income of $6,269, $6,169 and $6,422 for the years ended December 31, 2010, 2009 and 2008, respectively.  

In conjunction with certain acquisitions, the Company receives payments under master lease agreements pertaining to certain non-revenue producing spaces either at the time of, or subsequent to, the purchase of these properties.  Upon receipt of the payments, the receipts are recorded as a reduction in the purchase price of the related properties rather than as rental income.  These master leases were established at the time of purchase in order to mitigate the potential negative effects of loss of rent and expense reimbursements.  Master lease payments are received through a draw of funds escrowed at the time of purchase and generally cover a period from three months to three years.  These funds may be released to either the Company or the seller when certain leasing conditions are met.  The Company received $789, $1,231 and $3,067 of these payments during the years ended December 31, 2010, 2009 and 2008, respectively.

Profits from sales of real estate are not recognized under the full accrual method by the Company unlessa sale is consummated; the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property; the Company’s receivable, if applicable, is not subject to future subordination; the Company has transferred to the buyer the usual risks and rewards of ownership; and the Company does not have substantial continuing involvement with the property.  During the year ended December 31, 2010, the Company sold eight investment properties.  Refer to Note 3 for further information.  Eight investment properties were sold during the year ended December 31, 2009.

Rental Expense: Rental expense associated with land and office space that the Company leases under non-cancellable operating leases is recorded on a straight-line basis over the term of each lease.  The difference between rental expenses incurred on a straight-line basis and rent payments due under the provisions of the lease agreement is recorded as a deferred liability and is included as a component of “Other liabilities” in the accompanying consolidated balance sheets.  See Note 7 for additional information pertaining to these leases.

Loan Fees: Loan fees are generally amortized, using the effective interest method (or other methods which approximate the effective interest method), over the life of the related loans as a component of interest expense.  Debt prepayment penalties and certain fees associated with exchanges or modifications of debt are expensed as incurred as a component of interest expense.

Segment Reporting: The Company assesses and measures operating results of its properties based on net property operations. The Company internally evaluates the operating performance of its portfolio of properties and does not differentiate properties by geography, size or type. Each of the Company’s investment properties is considered a separate operating segment, as each property earns revenue and incurs expenses, individual operating results are reviewed and discrete financial information is available. However, the Company’s properties are aggregated into one reportable segment as the Company evaluates the aggregate performance of the properties.  

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

Effective January 1, 2009, companies that decrease their ownership in a subsidiary that involves in-substance real estate should account for the transaction under the guidance for sales of real estate. The transfer of the Company’s 23% interest in IW JV to Inland Equity for $50,000 was accounted for as a financing transaction and is reflected in “Co-venture obligation” on the consolidated balance sheets.

Effective January 1, 2010, companies that issue a portion of their distributions to shareholders in stock should account for the stock portion that allows the shareholder to elect to receive cash or shares with potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate as a share issuance, which is to be reflected in earnings per share prospectively. This guidance did not have a material effect on the Company’s consolidated financial statements.

Effective January 1, 2010, the analysis for identifying the primary beneficiary of a VIE has been simplified by replacing the previous quantitative-based analysis with a framework that is based more on qualitative judgments. The analysis requires the primary beneficiary of a VIE to be identified as the party that both (a) has the power to direct the activities of a VIE that most significantly impact its economic performance and (b) has an obligation to absorb losses or a right to receive benefits that could potentially be significant to the VIE. Although the amendment significantly affects the overall consolidation analysis under previously issued guidance, the adoption on January 1, 2010 did not have a material impact on the Company’s consolidated financial statements.  

Effective January 1, 2010, companies are required to separately disclose the amounts of significant transfers of assets and liabilities into and out of Level 1, Level 2 and Level 3 of the fair value hierarchy and the reasons for those transfers. Companies must also develop and disclose their policy for determining when transfers between levels are recognized. In addition, companies are required to provide fair value disclosures for each class rather than each major category of assets and liabilities. For fair value measurements using significant other observable inputs (Level 2) or significant unobservable inputs (Level 3), companies are required to disclose the valuation technique and the inputs used in determining fair value for each class of assets and liabilities. This guidance did not have a material effect on the Company’s consolidated financial statements.

Effective January 1, 2011, companies will be required to separately disclose purchases, sales, issuances and settlements on a gross basis in the reconciliation of recurring Level 3 fair value measurements. The Company does not expect this will have a material effect on its consolidated financial statements.

Effective January 1, 2011, public companies that enter into a business combination will be required to disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. In addition, the supplemental pro forma disclosures will be expanded.  If the Company enters into a business combination, it will comply with the disclosure requirements of this guidance.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

(3)  Discontinued Operations and Investment Properties Held for Sale

The Company employs a business model, which utilizes asset management as a key component of monitoring its investment properties, to ensure that each property continues to meet expected investment returns and standards.  This strategy incorporates the sale of non-core assets that no longer meet the Company’s criteria.

The Company sold eight properties during the year ended December 31, 2010, as summarized below:

Date		Square Footage	Property Type	Location		Sales Price		Net Sales Proceeds/ (Cash Outflow)		Gain/ (Loss)		Debt Extinguished
March 15, 2010		79,200	Single-user office	San Antonio, Texas	$	10,850	$	3,501	$	52	$	7,060	(a)
April 12, 2010		100,400	Medical center (b)	Cupertino, California		44,000		11,017		381		32,670	(a)
April 26, 2010		41,300	Single-user retail	Naperville, Illinois		4,775		(27)		875		4,964	(c)
May 28, 2010		48,800	Single-user retail	Hinsdale, Illinois		11,610		3,923		-		7,469	(a)
June 30, 2010		88,300	Single-user retail	Kansas City, Missouri		8,950		2		749		8,758	(a)
November 10, 2010		78,700	Single-user retail	San Diego, California		13,200		772		1,631		7,900	(a)
November 10, 2010		75,200	Single-user retail	Escondido, California		11,250		1,957		277		6,700	(a)
December 30, 2010		382,600	Single-user office	Richmond, Virginia		-		(121)		19,841		31,270	(d)
		894,500			$	104,635	$	21,024	$	23,806	$	106,791
(a)	The debt was repaid in conjunction with the sale.
(b)	This property qualified for held for sale accounting treatment during the fourth quarter 2009, at which time depreciation and amortization ceased since it met all of the Company's held for sale criteria.  As such, the assets and liabilities are separately classified as held for sale on the consolidated balance sheet as of December 31, 2009 and the operations for all periods presented are classified as discontinued operations on the consolidated statements of operations and other comprehensive loss.
(c)	Of the total amount of debt extinguished, $4,478 was repaid in conjunction with the sale and $486 was forgiven.
(d)	Property was transferred to the lender through a deed in lieu of foreclosure transaction.

In addition, as part of its overall liquidity strategy, the Company continues to enter into joint ventures, such as the RioCan joint venture where the Company retained a 20% interest.  The Company partially sold eight properties during the year ended December 31, 2010 to the RioCan joint venture (an unconsolidated joint venture further discussed in Note 11) which, due to the Company’s 20% ownership in the joint venture, do not qualify for discontinued operations accounting treatment, as summarized below:

Date		Square Footage	Property Type	Location		Sales Price (at 100%)		Net Sales Proceeds		Gain/ (Loss)		Debt Extinguished (at 100%)
September 30, 2010		116,400	Multi-tenant retail	Cypress, Texas	$	14,818	$	3,420	$	686	$	9,847	(a)
September 30, 2010		87,900	Multi-tenant retail	Houston, Texas		15,738		4,339		(180)		10,159	(a)
September 30, 2010		148,100	Multi-tenant retail	Houston, Texas		16,581		5,608		958		9,321	(a)
October 15, 2010		91,400	Multi-tenant retail	Coppell, Texas		11,639		1,146		(2,061)		10,050	(a)
October 15, 2010		96,400	Multi-tenant retail	Southlake, Texas		12,258		2,530		(489)		8,975	(a) (c)
October 22, 2010		60,500	Multi-tenant retail	Sugarland, Texas		11,250		8,923		207		-	(b)
November 1, 2010		266,800	Multi-tenant retail	Austin, Texas		21,769		7,192		(1,064)		12,663	(a)
December 16, 2010		92,300	Multi-tenant retail	Grand Prairie, Texas		15,311		5,800		1,667		8,449	(a)
December 30, 2010		186,400	Multi-tenant retail	Sugarland, Texas		40,554		9,658		(109)		28,424	(b)
		1,146,200			$	159,918	$	48,616	$	(385)	$	97,888
(a)	The debt was assumed by the RioCan joint venture in conjunction with the acquisition.
(b)	This is a single property that was sold in two phases.  The debt was held under the first phase which was contributed on December 30, 2010 and was assumed by the RioCan joint venture in conjunction with the acquisition.
(c)	Includes $476 of earnout proceeds received subsequent to the closing date

During 2009, the Company sold eight properties which resulted in net sales proceeds of $123,944 and gain on sales of $26,383.  No properties were sold during 2008.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

The Company does not allocate general corporate interest expense to discontinued operations.  The results of operations for the years ended December 31, 2010, 2009 and 2008 for the investment properties that are accounted for as discontinued operations are presented in the table below:

			Years Ended December 31,
			2010		2009		2008
Revenues:
	Rental income	$	2,092	$	22,353	$	40,920
	Tenant recovery income		(123)		3,278		7,358
	Other property income		29		719		109
Total revenues			1,998		26,350		48,387
Expenses:
	Property operating expenses		2,216		2,720		6,349
	Real estate taxes		498		2,615		3,263
	Depreciation and amortization		1,247		9,698		17,286
	Provision for impairment of investment properties		8,627		10,800		28,400
	Loss on lease terminations		-		-		2,444
	Interest expense		3,966		10,416		15,433
	Other expense		5		7		-
Total expenses			16,559		36,256		73,175
Operating loss from discontinued operations		$	(14,561)	$	(9,906)	$	(24,788)

No properties were classified as held for sale as of December 31, 2010.  The following assets and liabilities relate to the one investment property that was classified as held for sale as of December 31, 2009:

				December 31, 2009
Assets
	Land, building and other improvements		$	41,689
	Accumulated depreciation			(112)
				41,577
	Other assets			4,858
		Total assets associated with investment
		property held for sale	$	46,435
Liabilities
	Mortgage payable		$	32,670
	Other liabilities			2,125
Total liabilities associated with investment
	property held for sale		$	34,795

(4)  Transactions with Related Parties

The Inland Group, Inc., or the Inland Group, and its affiliates are related parties because of the Company’s relationships with Daniel L. Goodwin, Robert D. Parks and Brenda G. Gujral, each of whom are significant shareholders and/or principals of the Inland Group or hold directorships and are executive officers of affiliates of the Inland Group.  Specifically, Mr. Goodwin is the Chairman, chief executive officer and a significant shareholder of the Inland Group.  Mr. Parks is a principal and significant shareholder of the Inland Group.  Messrs. Goodwin and Parks and Ms. Gujral hold a variety of positions as directors and executive officers of Inland Group affiliates.   With respect to the Company, Mr. Goodwin is a beneficial owner of more than 5% of the Company’s common stock, Mr. Parks was a director and Chairman

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

of the Company’s board of directors until October 12, 2010 and Ms. Gujral is currently one of the Company’s directors and has held this directorship since 2003. Therefore, due to these relationships, transactions involving the Inland Group and/or its affiliates are set forth below.

			For the Years Ended December 31,						Unpaid Amount as of December 31,
Fee Category			2010		2009		2008		2010		2009
Investment advisor (a) (i)		$	272	$	67	$	1,390	$	22	$	20
Loan servicing (b) (j)			282		372		405		-		-
Mortgage financing (c) (j)			88		-		1,330		-		-
Transition property due diligence services (d) (k)			-		-		19		-		-
Institutional investor relationship services (e) (j)			18		34		10		-		-
Legal (f) (j)			343		551		500		100		123
Other service agreements (g) (j)			2,637		3,027		2,814		248		194
Office rent and related costs (h)			949		1,162		771		155		175
Total		$	4,589	$	5,213	$	7,239	$	525	$	512
(a)	An Inland affiliate, who is a registered investment advisor, provides investment advisory services to the Company related to the Company’s securities investment account for a fee (paid monthly) of up to one percent per annum based upon the aggregate fair value of the Company’s assets invested.  Subject to the Company’s approval and the investment guidelines it provides to them, the Inland affiliate has discretionary authority with respect to the investment and reinvestment and sale (including by tender) of all securities held in that account.  The Inland affiliate has also been granted power to vote all investments held in the account.  Effective for the period from November 1, 2008 through September 30, 2009, the investment advisor agreed to waive all fees due at the request of the Company.  Fees were incurred again beginning on October 1, 2009.
(b)	An Inland affiliate provides loan servicing for the Company for a monthly fee based upon the number of loans being serviced.
(c)	An Inland affiliate facilitates the mortgage financing the Company obtains on some of its properties.  The Company pays the Inland affiliate 0.2% of the principal amount of each loan obtained on the Company’s behalf.  Such costs are capitalized as loan fees and amortized over the respective loan term as a component of interest expense.
(d)	The Company has a transition property due diligence services agreement with an Inland affiliate.  In connection with the Company’s acquisition of new properties, the Inland affiliate will give the Company a first right as to all retail, mixed use and single-user properties and, if requested, provide various services including services to negotiate property acquisition transactions on the Company’s behalf and prepare suitability, due diligence, and preliminary and final pro forma analyses of properties proposed to be acquired.  The Company will pay all reasonable third-party out-of-pocket costs incurred by this entity in providing such services; pay an overhead cost reimbursement of $12 per transaction, and, to the extent these services are requested, pay a cost of $7 for due diligence expenses and a cost of $25 for negotiation expenses per trans action.
(e)	The Company has an institutional investor relationships services agreement with an Inland affiliate.  Under the terms of the agreement, the Inland affiliate will attempt to secure institutional investor commitments in exchange for advisory and client fees and reimbursement of project expenses.
(f)	An Inland affiliate has a legal services agreement with the Company, where that Inland affiliate will provide the Company with certain legal services in connection with the Company’s real estate business.  The Company will pay the Inland affiliate for legal services rendered under the agreement on the basis of actual time billed by attorneys and paralegals at the Inland affiliate’s hourly billing rate then in effect.  The billing rate is subject to change on an annual basis, provided, however, that the billing rates charged by the Inland affiliate will not be greater than the billing rates charged to any other client and will not be greater than 90% of the billing rate of attorneys of similar experience and position employed by nationally recognized law firms located in Chicago, Illinois performing similar services.
(g)	The Company has service agreements with certain Inland affiliates, including office and facilities management services, insurance and risk management services, computer services, personnel services, property tax services and communications services.  Generally, these agreements provide that the Company obtain certain services from the Inland affiliates through the reimbursement of a portion of their general and administrative costs.  The services are to be provided on a non-exclusive basis in that the Company shall be permitted to employ other parties to perform any one or more of the services and that the applicable counterparty shall be permitted to perform any one or more of the services to other parties.
(h)	The Company subleases its office space from an Inland affiliate.  The lease calls for annual base rent of $496 and additional rent in any calendar year of its proportionate share of taxes and common area maintenance costs.  Additionally, the Inland affiliate paid certain tenant improvements under the lease in the amount of $395 and such improvements are being repaid by the Company over a period of five years.  The sublease calls for an initial term of five years which expires in November 2012, with one option to extend for an additional five years.
(i)	The agreement is non-exclusive as to both parties and is cancellable by providing not less than 30 days prior written notice and specification of the effective date of said termination.
(j)	The agreement is non-exclusive as to both parties and is cancellable by providing not less than 180 days prior written notice and specification of the effective date of said termination.
(k)	The agreement is non-exclusive as to both parties and is cancellable by providing not less than 60 days prior written notice and specification of the effective date of said termination.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

On April 30, 2009, the Company sold two single-user office buildings to IARETI with an aggregate sales price of $99,000, which resulted in net sales proceeds of $34,572 and a gain on sale of $7,010.  The properties were located in Salt Lake City, Utah and Greensboro, North Carolina with approximately 395,800 square feet and 389,400 square feet, respectively.  The sale resulted in the assumption of debt in the amount of $63,189 by IARETI.  The special committee, consisting of independent directors, reviewed and recommended approval of these transactions to the Company’s board of directors.

On June 24, 2009, the Company sold an approximately 185,200 square foot single-user office building located in Canton, Massachusetts, to IARETI with a sales price of $62,632, which resulted in net sales proceeds of $17,991 and a gain on sale of $2,337.  The sale resulted in the assumption of debt in the amount of $44,500 by IARETI.  The special committee, consisting of independent directors, reviewed and recommended approval of this transaction to the Company’s board of directors.

On December 1, 2009, the Company raised additional capital of $50,000 from a related party, Inland Equity, in exchange for a 23% noncontrolling interest in IW JV.  Refer to Notes 1 and 10 for additional information.  The independent directors committee reviewed and recommended approval of this transaction to the Company’s board of directors.

(5)  Marketable Securities

The following tables summarize the Company’s investment in marketable securities:

			Common Stock		Preferred Stock			Total Available-for-Sale Securities
As of December 31, 2010:
	Fair value	$	15,117	$	19,113		$	34,230
	Amortized cost basis	$	28,997	$	38,592		$	67,589
	Total other-than-temporary impairment recognized	$	23,889	$	31,576		$	55,465
	Adjusted cost basis	$	5,108	$	7,016		$	12,124
	Net gains in accumulated other comprehensive income (OCI)	$	10,009	$	12,097		$	22,106
As of December 31, 2009:
	Fair value	$	9,388	$	19,729		$	29,117
	Amortized cost basis	$	25,735	$	57,995		$	83,730
	Total other-than-temporary impairment recognized	$	20,868	$	46,116		$	66,984
	Adjusted cost basis	$	4,867	$	11,879		$	16,746
	Net gains in accumulated OCI	$	4,521	$	7,911		$	12,432
	Net losses in accumulated OCI	$	-	$	61	(a)	$	61
(a)	This amount represents the gross unrealized losses of one preferred stock security with a fair value of $3,163 as of December 31, 2009. This security had been in a continuous unrealized loss position for greater than 12 months as of December 31, 2009.

		Years Ended December 31,
		2010		2009		2008
Net unrealized OCI gain (loss)	$	13,742	$	35,594	$	(115,716)
Other-than-temporary impairment	$	-	$	24,831	$	160,327
Net gain (loss) on sales of securities	$	4,007	$	42,870	$	(561)

(6)  Stock Option Plan

At the Company’s annual shareholders’ meeting held on October 14, 2008, the Company’s shareholders voted to approve the establishment of the Equity Compensation Plan, which, subject to certain conditions, authorizes (at the discretion of the board of directors) the issuance of stock options, restricted stock, stock appreciation rights and other similar awards to

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

the Company’s employees in connection with compensation and incentive arrangements that may be established by the board of directors.  At December 31, 2010, no awards under the Equity Compensation Plan have been granted.   

During 2010, the Compensation Committee approved an executive bonus program pursuant to which our executives are eligible to receive bonuses payable in shares of restricted common stock.  For each executive, a portion of his award, if any, will be based upon individual performance as determined by the Compensation Committee at its discretion and a portion, if any, will be based on certain corporate performance measures.  An insignificant amount of expense was recorded during 2010 related to this bonus program.  As of the date of this filing, the Compensation Committee had not yet met to finalize the 2010 awards, if any.  

The Company’s Independent Director Stock Option Plan (Plan), as amended, provides, subject to certain conditions, for the grant to each independent director of options to acquire shares following their becoming a director and for the grant of additional options to acquire shares on the date of each annual shareholders’ meeting.

As of December 31, 2010 and 2009, options to purchase 140 and 105 shares, respectively, of common stock have been granted, of which options to purchase 1 share and none, respectively, have been exercised and none have expired.

The Company calculates the per share weighted average fair value of options granted on the date of the grant using the Black Scholes option pricing model utilizing certain assumptions regarding the expected dividend yield (1.87%), risk free interest rate (1.13%), expected life (five years) and expected volatility rate (35%).  Compensation expense of $48, $24 and $8 related to these stock options was recorded during the years ended December 31, 2010, 2009 and 2008, respectively.  

(7)  Leases

Master Lease Agreements

In conjunction with certain acquisitions, the Company receives payments under master lease agreements pertaining to certain non-revenue producing spaces at the time of purchase for periods, generally ranging from three months to three years after the date of purchase or until the spaces are leased.  As these payments are received, they are recorded as a reduction in the purchase price of the respective property rather than as rental income.  The cumulative amount of such payments was $27,366, $26,577 and $25,346, as of December 31, 2010, 2009 and 2008, respectively.

Operating Leases

The majority of revenues from the Company’s properties consist of rents received under long-term operating leases.  Some leases provide for the payment of fixed base rent paid monthly in advance, and for the reimbursement by tenants to the Company for the tenant’s pro rata share of certain operating expenses including real estate taxes, special assessments, insurance, utilities, common area maintenance, management fees and certain building repairs paid by the landlord and recoverable under the terms of the lease.  Under these leases, the landlord pays all expenses and is reimbursed by the tenant for the tenant’s pro rata share of recoverable expenses paid.  Certain other tenants are subject to net leases which provide that the tenant is responsible for fixed based rent, as well as all costs and expenses associated with occupancy.  Under net leases where all expenses are paid directly by the tena nt rather than the landlord, such expenses are not included on the accompanying consolidated statements of operations and other comprehensive loss.  Under net leases where all expenses are paid by the landlord, subject to reimbursement by the tenant, the expenses are included in “Property operating expenses” and reimbursements are included in “Tenant recovery income” on the accompanying consolidated statements of operations and other comprehensive loss.

In certain municipalities, the Company is required to remit sales taxes to governmental authorities based upon the rental income received from properties in those regions.  These taxes may be reimbursed by the tenant to the Company depending upon the terms of the applicable tenant lease.  As with other recoverable expenses, the presentation of the remittance and reimbursement of these taxes is on a gross basis whereby sales tax expenses are included in “Property operating expenses” and sales tax reimbursements are included in “Other property income” on the accompanying

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

consolidated statements of operations and other comprehensive loss.  Such taxes remitted to governmental authorities and reimbursed by tenants were $1,928, $2,015 and $2,199 for the years ended December 31, 2010, 2009 and 2008, respectively.  

Minimum lease payments to be received under operating leases, excluding payments under master lease agreements and assuming no expiring leases are renewed, are as follows:

		Minimum Lease Payments
2011		473,772
2012		444,681
2013		409,597
2014		348,231
2015		284,634
Thereafter		1,305,747
Total	$	3,266,662

The remaining lease terms range from one year to 71 years.

In certain properties where there are large tenants, other tenants may have co-tenancy provisions within their lease that provide a right of termination or reduced rent if certain large tenants or “shadow” tenants discontinue operations.  The Company does not expect that such co-tenancy provisions will have a material impact on the future operating results.

The Company leases land under non-cancellable operating leases at certain of its properties expiring in various years from 2018 to 2105.  The related ground lease rent expense is included in “Property operating expenses” on the accompanying consolidated statements of operations and other comprehensive loss.  In addition, the Company leases office space for certain management offices from third parties and the Company subleases its corporate office space from an Inland affiliate.  Office rent expense is included in “Property operating expenses” in the accompanying consolidated statements of operations and other comprehensive loss.

		Years Ended December 31,
		2010		2009		2008
Ground lease rent expense	$	10,252	$	10,074	$	10,814
Office rent expense	$	757	$	810	$	774

Minimum future rental payments to be paid under the ground leases and office leases are as follows:

		Minimum Lease Payments
2011		6,244
2012		6,383
2013		6,467
2014		6,663
2015		6,676
Thereafter		547,849
Total	$	580,282

86

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

(8)  Mortgages and Notes Payable

The following table summarizes the Company’s mortgages and notes payable at December 31, 2010 and 2009:

		December 31,
		2010		2009
Fixed rate mortgages payable:
Mortgage loans (a)	$	3,334,784	$	3,718,038
Premium, net of accumulated amortization		17,534		-
Discounts, net of accumulated amortization		(2,502)		(3,011)
		3,349,816		3,715,027
Variable rate mortgages payable:
Mortgage loans		17,389		17,503
Construction loans		86,768		96,095
		104,157		113,598
Mortgages payable		3,453,973		3,828,625
Notes payable		138,900		175,360
Margin payable		10,017		-
Mortgages and notes payable	$	3,602,890	$	4,003,985
(a) Includes $67,504 of variable rate debt that was swapped to a fixed rate.

Mortgages Payable

Mortgages payable outstanding as of December 31, 2010 were $3,453,973 and had a weighted average interest rate of 5.99% at December 31, 2010.  Of this amount, $3,349,816 had fixed rates ranging from 4.44% to 10.04% and a weighted average fixed rate of 6.04% at December 31, 2010.  The weighted average interest rates for the fixed rate mortgages payable exclude the impact of the premium and discount amortization.  The remaining $104,157 of outstanding indebtedness represented variable rate loans with a weighted average interest rate of 4.47% at December 31, 2010.  Properties with a net carrying value of $5,170,029 at December 31, 2010 and related tenant leases are pledged as collateral for the mortgage loans.  Development properties with a net carrying value of $62,704 at December 31, 2010 and related tenant leases are pledged as collateral for the construction loans.  As of December 31, 2010, scheduled maturities for the Company’s outstanding mortgage indebtedness had various due dates through March 1, 2037.

During the year ended December 31, 2010, the Company obtained mortgages and notes payable proceeds of $737,890, made mortgages and notes payable repayments of $1,018,351 and received forgiveness of debt of $50,831.  In addition, the RioCan joint venture assumed $97,888 of mortgages payable from the Company during 2010.  As a result of accounting for a group of eight mortgage refinancings as a modification under GAAP during the second quarter of 2010, the portion of the debt forgiveness associated with one property was recorded as mortgage premium on the remaining seven mortgages payable and is being amortized over the remaining term of those loans using the effective interest method.  The new mortgages payable that the Company entered into during the year ended December 31, 2010 have interest rates ranging from 2.48% to 8.00% and maturities up to ten years.  The stated interest rates of the loans repaid during t he year ended December 31, 2010 ranged from 1.65% to 6.75%.  The Company also entered into modifications of existing loan agreements, which extended the maturities of $229,313 of mortgages payable up to December 2012.

Mortgages payable outstanding, excluding liabilities associated with the investment property held for sale, as of December 31, 2009 were $3,828,625 and had a weighted average interest rate of 5.57% at December 31, 2009.  Of this amount, $3,715,027 had fixed rates ranging from 4.25% to 10.24% and a weighted average fixed rate of 5.63% at December 31, 2009.  The remaining $113,598 of outstanding indebtedness represented variable rate loans with a weighted average interest rate of 3.56% at December 31, 2009.  Properties with a net carrying value of $5,649,570 at December 31, 2009

87

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

and related tenant leases are pledged as collateral for the mortgage loans.  Development properties with a net carrying value of $88,524 at December 31, 2009 and related tenant leases are pledged as collateral for the construction loans.  As of December 31, 2009, scheduled maturities for the Company’s outstanding mortgage indebtedness had various due dates through March 1, 2037.

The majority of the Company’s mortgages payable require monthly payments of interest only, although it has become more common for lenders to require principal and interest payments, as well as reserves for real estate taxes, insurance and certain other costs.  Although the loans obtained by the Company are generally non-recourse, occasionally, when it is deemed to be necessary, the Company may guarantee all or a portion of the debt on a full-recourse basis.  As of December 31, 2010, the Company has guaranteed $55,053 of the outstanding mortgages payable with maturity dates up to August 1, 2014 (see Note 16).  At times, the Company has borrowed funds financed as part of a cross-collateralized package, with cross-default provisions, in order to enhance the financial benefits.  In those circumstances, one or more of the properties may secure the debt of another of the Company’s properties.  Individua l decisions regarding interest rates, loan-to-value, debt yield, fixed versus variable-rate financing, term and related matters are often based on the condition of the financial markets at the time the debt is issued, which may vary from time to time.  

As of December 31, 2010, the Company had $123,198 of mortgages payable that had matured.  During the second quarter of 2010, in order to prompt discussions with the lenders, the Company ceased making monthly debt service payments on two mortgage loans totaling $61,235.  One of these two properties was transferred to the lender in December 2010 as deed in lieu of foreclosure and the Company received debt forgiveness of $31,270 and recorded a gain on sale in discontinued operations of $19,841.  The remaining $29,965 has matured and is included in the $123,198 of total matured debt.  The non-payment of this monthly debt service payment amounts to $1,432 annualized and does not result in noncompliance under any of the Company’s other mortgages payable and line of credit agreements.  The Company has attempted to negotiate and has made offers to the lender to determine an appropriate course of action under t he non-recourse loan agreement. No assurance can be provided that negotiations will result in a favorable outcome for the Company.  The lender has asserted that certain events have occurred that trigger recourse to the Company.  However, the Company believes that it has substantive defenses with respect to those claims.

As of December 31, 2010, in addition to the $123,198 that had matured, the Company had $517,513 of mortgages payable, excluding principal amortization, maturing in 2011.  The following table sets forth the Company’s progress as of the date of this filing in addressing 2010 and 2011 maturities:

		Matured as of December 31, 2010		Maturing in 2011
Repaid or received debt forgiveness and added the underlying property as collateral to the senior secured credit facility	$	65,902	$	107,824
Refinanced		-		10,153
Other repayments		-		1,463
Total addressed subsequent to December 31, 2010		65,902		119,440
Expected to be repaid and the underlying property will be added as collateral to the senior secured credit facility in March 2011		21,715		81,809
Actively marketing to sell or refinance related properties or seeking extensions		35,581		316,264
	$	123,198	$	517,513

Some of the mortgage payable agreements include periodic reporting requirements and/or debt service coverage ratios which allow the lender to control property cash flow if the Company fails to meet such requirements.  Management believes the Company was in compliance with such provisions at December 31, 2010.

88

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Notes Payable

The following table summarizes the Company’s notes payable as of December 31, 2010 and 2009:

		December 31,
		2010		2009
IW JV Senior Mezzanine Note	$	85,000	$	85,000
IW JV Junior Mezzanine Note		40,000		40,000
Mezzanine Note		13,900		-
Note payable to MS Inland		-		50,000
Third Party Note		-		360
	$	138,900	$	175,360

Notes payable outstanding as of December 31, 2010 were $138,900 and had a weighted average interest rate of 12.62% at December 31, 2010. Of this amount, $125,000 represents notes payable proceeds from a third party lender related to the debt refinancing transaction for IW JV as discussed in Note 1. The notes have fixed interest rates ranging from 12.24% to 14.00%, mature on December 1, 2019 and are secured by 100% of the Company’s equity interest in the entity owning the IW JV investment properties.

During the year ended December 31, 2010, the Company borrowed $13,900 from a third party in the form of a mezzanine note and used the proceeds as a partial paydown of the mortgage payable, as required by the lender.  The mezzanine note bears interest at 11.00% and matures in three years. In addition, the Company made notes payable repayments of $50,319, of which $50,000 represented a note payable to MS Inland, an unconsolidated joint venture, that bore interest at 4.80% and $319 related to a $600 note, net of amortization, with a third party that bore interest at 2.00% and matured on September 29, 2010.  Subsequent to the payoff of the $50,000 MS Inland note, the Company received a distribution of $65,240 from MS Inland.

Derivative Instruments and Hedging Activities       

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions.  The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities.  The Company manages economic risk, including interest rate, liquidity and credit risk primarily by managing the amount, sources, and duration of its debt funding and, to a limited extent, the use of derivative instruments.

Specifically, the Company has entered into derivative instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates.  The Company’s derivative instruments, described below, are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash payments principally related to certain of the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.  To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The Company utilizes two interest rate swaps to hedge the variable cash flows associated with variable-rate debt. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in

89

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

“Accumulated other comprehensive income” and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.  The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.  Due to the Company’s decision in June 2010 to voluntarily prepay a portion of its hedged debt, the Company’s variable-rate debt fell below the notional value on the interest rate swap hedging the aforementioned debt, causing the Company to be temporarily overhedged, but the interest rate swap continues to qualify as an effective hedge.  On June 30, 2010, the Company unwound the portion of the swap notional that corresponded with the prepayment.  In December 2010, the Company terminated a portion of its hedged debt and embedded the existing liability into a new swap which for accounting purposes is being considered an off-market hedging relationship.  As a result, the Company expects ineffectiveness in future periods based upon the nature of the new hedging relationship and is reclassifying the accumulated other comprehensive income from the prior hedging relationship into earnings over time.  During the year ended December 31, 2010, the Company recorded hedge ineffectiveness of $232 (loss).  During the years ended December 31, 2009 and 2008, the Company recorded no hedge ineffectiveness.

Amounts reported in “Accumulated other comprehensive income” related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt.  Over the next year, the Company estimates that an additional $1,301 will be reclassified as an increase to interest expense.  During the year ended December 31, 2010, the Company accelerated $117 (loss) from other comprehensive income into earnings as a result of the hedged forecasted transactions becoming probable not to occur.  There were no such accelerations during the years ended December 31, 2009 and 2008.

As of December 31, 2010 and 2009, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Interest Rate Derivatives	Number of Instruments	Notional
Interest Rate Swap	2	$	67,504

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of December 31, 2010 and 2009.

		Liability Derivatives
		December 31, 2010			December 31, 2009
		Balance Sheet Location		Fair Value	Balance Sheet Location		Fair Value
Derivatives designated as cash flow hedges:
	Interest rate swaps	Other liabilities	$	2,967	Other liabilities	$	3,819

The table below presents the effect of the Company’s derivative financial instruments on the consolidated statements of operations and other comprehensive loss for the years ended December 31, 2010 and 2009.

Derivatives in Cash Flow Hedging Relationships	Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion)				Location of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)				Location of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing and Missed Forecasted Transactions)
Interest Rate	Years Ended December 31,					Years Ended December 31,					Years Ended December 31,
Swaps	2010		2009			2010		2009			2010		2009
	$	(1,722)	$	(1,398)	Interest Expense	$	(2,970)	$	(3,095)	Other Expense	$	(350)	$	-

90

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Credit-risk-related Contingent Features

Derivative financial investments expose the Company to credit risk in the event of non-performance by the counterparties under the terms of the interest rate hedge agreements.  The Company believes it minimizes the credit risk by transacting with major creditworthy financial institutions.  As part of the Company’s on-going control procedures, it monitors the credit ratings of counterparties and the exposure to any single entity, which minimizes credit risk concentration.  The Company believes the likelihood of realized losses from counterparty non-performance is remote.

The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on the related indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its corresponding derivative obligation.

The Company’s agreements with each of its derivative counterparties also contain a provision whereby if the Company consolidates with, merges with or into, or transfers all or substantially all its assets to another entity and the creditworthiness of the resulting, surviving, or transferee entity is materially weaker than the Company’s, the counterparty has the right to terminate the derivative obligations.

As of December 31, 2010, the fair value of derivatives in a liability position, which includes accrued interest of $68 but excludes any adjustment for nonperformance risk, which the Company has deemed immaterial, was $3,159.  As of December 31, 2010, the Company has not posted any collateral related to these agreements.  If the Company had breached any of these provisions at December 31, 2010, it could have been required to settle its obligations under the agreements at their termination value of $3,159.

Margin Payable

The Company purchases a portion of its securities through a margin account.  As of December 31, 2010 and 2009, the Company had recorded a payable of $10,017 and none, respectively, for securities purchased on margin.  This debt bears a variable interest rate of the London Interbank Offered Rate, or LIBOR, plus 35 basis points.  At December 31, 2010, this rate was equal to 0.61%.  Interest expense on this debt in the amount of $96, $252 and $3,443 is recognized within “Interest expense” in the accompanying consolidated statements of operations and other comprehensive loss for the years ended December 31, 2010, 2009 and 2008, respectively.  This debt is due upon demand.  The value of the Company’s marketable securities serves as collateral for this debt.  During the year ended December 31, 2010, the Company borrowed $22,860 on its margin account and paid down $12,843.

91

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Debt Maturities

The following table shows the scheduled maturities of mortgages payable, notes payable, margin payable and the line of credit as of December 31, 2010 and for the next five years and thereafter and does not reflect the impact of any 2011 debt activity:

				2011		2012		2013		2014		2015		Thereafter		Total		Fair Value
Maturing debt (a) :
	Fixed rate debt:
	Mortgages payable (b)		$	646,060	$	411,493	$	305,913	$	219,832	$	468,143	$	1,283,343	$	3,334,784	$	3,364,801
	Notes payable			-		-		13,900		-		-		125,000		138,900		149,067
	Total fixed rate debt		$	646,060	$	411,493	$	319,813	$	219,832	$	468,143	$	1,408,343	$	3,473,684	$	3,513,868
	Variable rate debt:
	Mortgages payable		$	15,987	$	88,170	$	-	$	-	$	-	$	-	$	104,157	$	104,157
	Line of Credit			154,347		-		-		-		-		-		154,347		154,347
	Margin payable			10,017		-		-		-		-		-		10,017		10,017
	Total variable rate debt			180,351		88,170		-		-		-		-		268,521		268,521
Total maturing debt			$	826,411	$	499,663	$	319,813	$	219,832	$	468,143	$	1,408,343	$	3,742,205	$	3,782,389
Weighted average interest
	rate on debt:
	Fixed rate debt			5.43%		5.46%		5.55%		7.17%		5.78%		7.16%
	Variable rate debt			5.16%		4.00%		-		-		-		-
	Total			5.37%		5.20%		5.55%		7.17%		5.78%		7.16%
(a)		The debt maturity table does not include any premiums or discounts, of which $17,534 and $(2,502), net of accumulated amortization, respectively, is outstanding as of December 31, 2010.
(b)		Includes $67,504 of variable rate debt that was swapped to a fixed rate.

The maturity table excludes other financings and the co-venture obligation as described in Notes 1 and 10.  The maturity table also excludes accelerated principal payments that may be required as a result of covenants or conditions included in certain loan agreements.  In these cases, the total outstanding mortgage payable is included in the year corresponding to the loan maturity date.  The maturity table includes $123,198 of mortgages payable that had matured as of December 31, 2010 in the 2011 column.  See the mortgages payable section above for additional information on how the Company is addressing its 2011 mortgages payable maturities.

(9)  Line of Credit  

The Company had secured credit agreement with KeyBank National Association and other financial institutions for borrowings up to $200,000, subject to the collateral pool requirement described below.  Based on the appraised value of the collateral pool, the Company’s ability to borrow was limited to $160,902 as of December 31, 2010.  The credit agreement had an original maturity date of October 14, 2010, which was extended to October 14, 2011.  The credit agreement requires compliance with certain covenants, such as, among other things, a leverage ratio, fixed charge coverage, minimum net worth requirements, distribution limitations and investment restrictions, as well as limitations on the Company’s ability to incur recourse indebtedness.  The credit agreement also contains customary default provisions including the failure to timely pay debt service payable thereunder, the fai lure to comply with the Company’s financial and operating covenants, and the failure to pay when the consolidated indebtedness becomes due.  In the event the lenders under the credit agreement declare a default, as defined in the credit agreement, this could result in an acceleration of any outstanding borrowings on the line of credit.

92

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

The terms of the credit agreement stipulate, as of December 31, 2010:

·

monthly interest-only payments on the outstanding balance at the rate equal to LIBOR (3% floor) plus 3.50%;

·

quarterly fees ranging from 0.35% to 0.50%, per annum, on the average daily undrawn funds;

·

pay down of the line from net proceeds of asset sales;

·

an assignment of corporate cash flow in the event of default;

·

the requirement for a comprehensive collateral pool (secured by mortgage interests in each asset) subject to certain covenants, including a maximum advance rate on the appraised value of the collateral pool of 60%, minimum requirements related to the value of the collateral pool and the number of properties included in the collateral pool, and debt service coverage, and

·

permissions for non-recourse cross-default up to $250,000 and permissions for loans that have matured under non-recourse indebtedness for up to 90 days subject to extension at discretion of the lenders.

On February 4, 2011, the Company amended and restated its credit agreement.  The terms of the amendment stipulate:

·

an increase in the aggregate commitment from $200,000 to $585,000 at closing, consisting of a $435,000 senior secured revolving line of credit and a $150,000 secured term loan, and an accordion feature that allows the Company to increase the availability under the senior secured revolving line of credit to up to $500,000 in certain circumstances;

·

additions to the collateral pool secured by mortgage liens for an additional 16 properties, bringing the total collateral pool appraised valued to approximately $529,000 at closing ($565,000 as of the date of this filing);

·

the requirement for a comprehensive collateral pool (secured by mortgage interests in each asset) subject to certain covenants, including a reduction in the maximum advance rate on the appraised value of the collateral pool from 65% to 60% and requirements related to the value of the collateral pool, the number of properties included in the collateral pool, leverage and debt service coverage;

·

change in the LIBOR spread on advances to 2.75% to 4.00% from 3.50%, depending on leverage levels;

·

removal of the LIBOR floor of 3.00%;

·

an increase in the unused fees to 0.40% or 0.50% depending on the undrawn amount;

·

an increase in the amount of recourse cross-default permissions from none to $20,000;

·

a decrease in the amount of non-recourse cross-default permissions from $250,000 to $100,000, subject to certain carve-outs and allowances for maturity defaults under non-recourse indebtedness for up to 90 days subject to extension at discretion of the lenders, and

·

customary fees associated with the modification.

In exchange for these amendments, certain of the financial terms and covenants under the credit agreement have been modified, namely the leverage ratio and fixed charge coverage covenants, retroactive to December 31, 2010.  The senior secured revolving line of credit and the secured term loan mature on February 3, 2013, subject to a one-year extension option.  As of the date of this filing, the interest rate under the credit agreement is 4.31%.  As of December 31, 2010, the Company was in compliance with all of the financial covenants under its credit agreement.  The outstanding balance on the line of credit at December 31, 2010 and 2009 was $154,347 and $107,000, respectively.

93

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

(10)  Co-venture Obligation

As discussed in Note 1, on December 1, 2009, the Company transferred a 23% noncontrolling interest in IW JV to a related party, Inland Equity, in exchange for $50,000.

The Company is the controlling member in IW JV.  The organizational documents of IW JV contains provisions that require the entity to be liquidated through the sale of its assets upon reaching a future date as specified in the organizational document or through a call arrangement.  As controlling member, the Company has an obligation to cause these property owning entities to distribute proceeds from liquidation to the noncontrolling interest partner only if the net proceeds received by each of the entities from the sale of assets warrant a distribution based on the agreements.  In addition, at any time after 90 days from the date of Inland Equity’s contribution, the Company has the option to call Inland Equity’s interest in IW JV for an amount which is the greater of either: (a) fair market value of Inland Equity’s interest or (b) $50,000, plus an additional distribution of $5,000 and any unpaid pre ferred return or promote.  Since the outside ownership interest in IW JV is subject to a call arrangement, the transaction does not qualify as a sale and is accounted for as a financing arrangement.  Accordingly, IW JV is treated as a 100% owned subsidiary by the Company with the amount due to Inland Equity reflected as a financing in “Co-venture obligation” in the accompanying consolidated balance sheets.  

If Inland Equity retains an ownership interest in IW JV through the liquidation of the joint venture, Inland Equity may be entitled to receive an additional distribution of $5,000, depending on the availability of proceeds at the time of liquidation.  

Pursuant to the terms of the IW JV agreement, Inland Equity earns a preferred return of 6% annually, paid monthly and cumulative on any unpaid balance.  Inland Equity earns an additional 5% annually, set aside monthly and paid quarterly, if the portfolio net income is above a target amount as specified in the agreement.  Expense is recorded on such liability in the amount equal to the preferred return, incentive and other compensation due to Inland Equity as provided by the LLC agreement and is included in “Co-venture obligation expense” in the accompanying consolidated statements of operations and other comprehensive loss.

The Company anticipates exercising its call option prior to reaching the liquidation date.  As a result, the Company is accreting the estimated additional amount it would be required to pay upon exercise of the call option over the anticipated exercise period of three years and, as such, has cumulatively accreted $1,264 through December 31, 2010.

(11)  Investment in Unconsolidated Joint Ventures

The following table summarizes the Company’s investments in unconsolidated joint ventures:

				Ownership Interest			Investment at
		Date of	Date of	December 31			December 31
Joint Venture	Location	Investment	Redemption	2010	2009		2010		2009
MS Inland	Various	04/27/2007	N/A	20.0%	20.0%	$	9,884	$	77,059
Hampton Retail Colorado	Denver, CO	08/31/2007	N/A	95.8%	95.5%		4,059		1,898
RioCan	Various	09/30/2010	N/A	20.0%	N/A		12,292		-
Oak Property and Casualty	Burlington, VT	10/01/2006	N/A	25.0%	25.0%		7,230		-
						$	33,465	$	78,957

The Company has the ability to exercise significant influence, but does not have the financial or operating control over these investments, and as a result the Company accounts for these investments using the equity method of accounting.  Under the equity method of accounting, the net equity investment of the Company is reflected on the accompanying consolidated balance sheets and the accompanying consolidated statements of operations and other comprehensive loss includes the Company’s share of net income or loss from the unconsolidated joint venture.  Distributions from these investments that are related to income from operations are included as operating activities and distributions that are related to capital transactions are included in investing activities in the Company’s consolidated statements of cash flows.

94

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Effective April 27, 2007, the Company formed a strategic joint venture (MS Inland) with a large state pension fund (the “institutional investor”).  Under the terms of the agreement, the profits and losses of MS Inland are split 80% and 20% between the institutional investor and the Company, respectively, except for the interest earned on the initial invested funds, of which the Company is allocated 95%.  The Company’s share of profits in MS Inland was $1,339, $1,699 and $1,581, for the years ended December 31, 2010, 2009 and 2008, respectively.  The Company received net cash distributions from MS Inland totaling $70,761, $4,176 and $4,910, for the years ended December 31, 2010, 2009 and 2008, respectively.  The 2010 total of $70,761 included $65,240 consisting of both funds that were previously escrowed by MS Inland and the repayment by the Company of a $50,000 note payable to MS Inland.

The difference between the Company’s investment in MS Inland and the amount of the underlying equity in net assets of MS Inland is due to basis differences resulting from the Company’s contribution of property assets at their historical net book value versus the fair value of the contributed properties.  Such differences are amortized over the depreciable lives of MS Inland’s property assets.  The Company recorded $322, $326 and $320 of amortization related to this difference for each of the years ended December 31, 2010, 2009 and 2008, respectively.  

MS Inland may acquire additional assets using leverage, consistent with its existing business plan, of approximately 50% of the original purchase price or current fair value, if higher.  The Company is the managing member of MS Inland and earns fees for providing property management, acquisition and leasing services to MS Inland.  The Company earned fees of $1,155, $1,193 and $1,209 during the years ended December 31, 2010, 2009 and 2008, respectively.  

On August 28, 2007, the Company formed an unconsolidated joint venture, Hampton Retail Colorado (Hampton), which subsequently, through wholly-owned subsidiaries Hampton Owned Colorado (Hampton Owned) and Hampton Leased Colorado (Hampton Leased), acquired nine single-user retail properties and eight leasehold assets, respectively.  The ownership percentages associated with Hampton at December 31, 2009 and 2008, are based upon the Company’s pro-rata share of capital contributions to date.  Based upon the maximum capital contribution obligations outlined in the joint venture agreement, the Company’s ownership percentage could increase to 96.3%.  The Company’s share of net income (loss) in Hampton was $819, $(13,282) and $(6,664) for the years ended December 31, 2010, 2009 and 2008, respectively, and is included in “Equity in income (loss) of unconsolidated joint ventures” in the consolidated state ments of operations and other comprehensive loss.  

As of December 31, 2010, there were six properties remaining in the Hampton joint venture, all of which are included in Hampton Owned.  The remaining properties have been disposed of primarily through sales and assignment.  During the year ended December 31, 2010, Hampton Owned completed the sale of three single-user retail properties, aggregating 126,700 square feet for a combined sales price of $1,885.  The aggregated sales resulted in the repayment of debt of $1,626, forgiveness of debt of $1,644, and total gains on sale of $210.

On May 20, 2010, the Company entered into definitive agreements to form a joint venture with RioCan Real Estate Investment Trust (RioCan), a REIT based in Canada.  The initial RioCan joint venture investment included up to eight grocery and necessity-based-anchored shopping centers located in Texas.  Under the terms of the agreements, RioCan contributed cash for an 80% interest in the venture and the Company contributed a 20% interest in the properties. The joint venture acquired an 80% interest in the properties from the Company in exchange for cash, each of which was accounted for as a partial sale of real estate. Each property closing occurred individually over time based on timing of lender consent or refinance of the related mortgages payable.  The Company will earn property management, asset management and other customary fees on the joint venture.  Certain of the properties contain earnout provisions wh ich, if met, would result in additional sales proceeds to the Company.  As of December 31, 2010, the joint venture had acquired eight properties.  These transactions do not qualify as discontinued operations in the Company’s consolidated statements of operations and other comprehensive loss as a result of the Company’s 20% ownership in the joint venture.  The Company received net cash distributions from the RioCan joint venture totaling $200 for the year ended December 31, 2010.

The difference between the Company’s investment in the RioCan joint venture and the amount of the underlying equity in net assets of the joint venture is due to basis differences resulting from the Company’s contribution of property assets at

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Notes to Consolidated Financial Statements

their historical net book value versus the fair value of the contributed properties.  Such differences are amortized over the depreciable lives of the RioCan joint venture’s property assets.

On December 1, 2010, it was determined that the Company was no longer the primary beneficiary of the Captive, or Oak Property & Casualty, an insurance association captive wholly-owned by the Company and three related parties, IREC, IARETI and IDRETI.  As a result, the Company’s investment in the Captive has been and will continue to be reflected as an equity method investment beginning December 1, 2010.  Refer to Note 1 for further information.  The Company’s share of loss in the Captive was $45 for the one month period ended December 31, 2010.

The Company previously held an investment in an unconsolidated joint venture, San Gorgonio Village.  During the year ended December 31, 2008, the Company determined that its investment in San Gorgonio Village was not recoverable as a result of construction cost overruns and uncertainty regarding the Company’s intentions to continue with the development project.  As a result, a $5,524 impairment loss was recorded on the Company’s investment in this unconsolidated joint venture and is included in “Impairment of investment in unconsolidated entity” on the accompanying consolidated statements of operations and other comprehensive loss.  On December 29, 2008, the Company withdrew from the joint venture and was released of any future liability resulting in a $5,524 total loss of the Company’s investment in unconsolidated joint venture.

The Company’s investments in unconsolidated joint ventures are reviewed for potential impairment, in addition to impairment evaluations of the individual assets underlying these investments, whenever events or changes in circumstances warrant such an evaluation.  To determine whether impairment is other-than-temporary, the Company considers whether it has the ability and intent to hold the investment until the carrying value is fully recovered.  As a result, the carrying value of its investment in the unconsolidated joint ventures was determined to be fully recoverable as of December 31, 2010 and 2009.

(12)  Earnings per Share

Basic earnings (loss) per share (EPS) is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period (the “common shares”).  Diluted EPS is computed by dividing net income (loss) by the common shares plus shares issuable upon exercising options.  As of December 31, 2010 and 2009, options to purchase 139 and 105 shares of common stock, respectively, at the weighted average exercise price of $8.68 and $9.30 per share, respectively, were outstanding.  The Company is in a net loss position for the years ended December 31, 2010, 2009 and 2008; therefore, the options to purchase shares are not considered in diluted loss per share since their effect is anti-dilutive.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

The following is a reconciliation between weighted average shares used in the basic and diluted EPS calculations, excluding amounts attributable to noncontrolling interests:

				Years Ended December 31,
				2010			2009			2008
Numerator:
Net loss from continuing operations			$	(103,952)		$	(131,886)		$	(658,425)
(Income) loss from continuing operations attributable to noncontrolling interests				(1,136)			3,074			(514)
Loss from continuing operations attributable to Company shareholders				(105,088)			(128,812)			(658,939)
Income (loss) from discontinued operations				9,245			16,477			(24,788)
Net loss attributable to Company shareholders			$	(95,843)		$	(112,335)		$	(683,727)
Denominator:
Denominator for loss per common share-basic:
	Weighted average number of common shares outstanding			483,743			480,310			481,442
Effect of dilutive securities:
	Stock options			-	(a)		-	(a)		-	(a)
Denominator for loss per common share-diluted:
	Weighted average number of common and common equivalent shares outstanding			483,743			480,310			481,442
(a)		Outstanding options to purchase shares of common stock, the effect of which would be anti-dilutive, were 139, 105 and 70 shares as of December 31, 2010, 2009 and 2008, respectively. These shares were not included in the computation of diluted earnings per share because a loss was reported or the option exercise price was greater than the average market price of the common shares for the respective periods.

(13)  Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code.  To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income to the Company’s shareholders, determined without regard to the deduction for dividends paid and excluding net capital gains.  The Company intends to continue to adhere to these requirements and to maintain its REIT status.  As a REIT, the Company is entitled to a deduction for some or all of the distributions it pays to shareholders.  Accordingly, the Company generally will not be subject to federal income taxes on the taxable income distributed to its shareholders.  The Company is generally subject to federal income taxes on any taxable income that is not currently distributed to its shareholders.  If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes and may not be able to qualify as a REIT for four subsequent taxable years.

REIT qualification reduces, but does not eliminate, the amount of state and local taxes the Company pays.  In addition, the Company’s consolidated financial statements include the operations of one wholly-owned subsidiary that has elected to be treated as a TRS that is not entitled to a dividends paid deduction and is subject to corporate federal, state and local income taxes.  The Company recorded no income tax expense related to the TRS for the years ended December 31, 2010, 2009 and 2008, as a result of losses incurred during these periods.

In connection with the preparation for a potential listing of the Company’s common stock on the New York Stock Exchange, it was discovered that certain aspects of the operation of the Company’s DRP prior to May 2006 may have violated the prohibition against preferential dividends, which do not qualify for the dividends paid deduction.  To avoid paying preferential dividends, the Company must treat every shareholder of a class of stock with respect to which the Company makes a distribution the same as every other shareholder of that class, and the Company must not treat any class of stock other than according to its dividend rights as a class.

On January 20, 2011, the Company filed a request for a closing agreement from the IRS whereby the IRS would agree that the Company’s dividends paid deduction for the taxable years 2004 through 2006, the years for which the Company had positive taxable income, was sufficient for the Company to qualify for taxation as a REIT.  The IRS is currently reviewing the Company’s request and continues to move it through its review process.  If the IRS does not enter into a

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

closing agreement, the Company could incur a tax related liability, representing a payment of corporate taxes due for past periods including interest and penalties for the open statutory tax years the Company would not have qualified as a REIT.

While there can be no assurance that the IRS will enter into a closing agreement with the Company, based upon the IRS entering into closing agreements with other REITs, the Company expects to obtain a closing agreement with the IRS for an estimated cost plus interest of approximately $62.  The Company estimates the range of loss that is reasonably possible is from $62 if it obtains the closing agreement to approximately $155,000 if it does not obtain the closing agreement.  The Company believes that it is probable that it will enter into a closing agreement with the IRS and as a result had recorded an expense of $62 during the year ended December 31, 2010.  

As a REIT, the Company may also be subject to certain federal excise taxes if it engages in certain types of transactions.  Deferred income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the estimated future consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.  Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which these temporary differences are expected to reverse.  Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including future reversal of existing taxable temporary differences, future projected taxable income and tax planning strategies.  In assessing the realizability of de ferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  The Company has considered various factors, including future reversals of existing taxable temporary differences, projected future taxable income and tax-planning strategies in making this assessment.  The Company believes any deferred tax asset will not be realized in future periods and therefore, has recorded a valuation allowance for the entire balance, resulting in no effect on the consolidated financial statements.

The Company’s deferred tax assets and liabilities as of December 31, 2010 and 2009 were as follows:

		2010		2009
Deferred tax assets:
Impairment of assets	$	2,874	$	5,795
Capital loss carryforward		1,975		1,664
Net operating loss carryforward		4,047		4,114
Other		202		430
Gross deferred tax assets		9,098		12,003
Less: valuation allowance		(6,823)		(11,793)
Total deferred tax assets		2,275		210
Deferred tax liabilities
Other		(2,275)		(210)
Net deferred tax assets	$	-	$	-

The Company’s deferred tax assets and liabilities result from the activities of the TRS.  As of December 31, 2010, the TRS had a federal net operating loss (NOL) of $11,051, which will be available to offset future taxable income.  The TRS also had net capital losses (NCL) in excess of capital gains of $5,392 as of December 31, 2010, which can be carried forward to offset future capital gains.  If not used, the NOL and NCL will begin to expire in 2027 and 2013, respectively.

Differences between net loss per the consolidated statements of operations and other comprehensive loss and the Company’s taxable income (loss) primarily relate to impairment charges recorded on investment properties, other-than-temporary impairment on the investments in marketable securities, the timing of revenue recognition, and investment property depreciation and amortization.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

The following table reconciles the Company’s net loss to taxable income before the dividends paid deduction for the years ended December 31, 2010, 2009 and 2008:

			2010		2009		2008
Net loss attributable to Company shareholders		$	(95,843)	$	(112,335)	$	(683,727)
Book/tax differences			68,240		157,492		799,227
Adjust for negative taxable income			27,603		-		-
Taxable income subject to 90%
	dividend requirement	$	-	$	45,157	$	115,500

The Company’s dividends paid deduction is summarized below:

			2010		2009		2008
Cash distributions paid		$	83,385	$	84,953	$	309,198
Less: return of capital			(83,385)		(39,293)		(191,921)
Total dividends paid deduction attributable
	to adjusted taxable income	$	-	$	45,660	$	117,277

A summary of the tax characterization of the distributions paid for the years ended December 31, 2010, 2009 and 2008 follows:

		2010		2009		2008
Ordinary income	$	-	$	0.10	$	0.24
Return of capital		0.17		0.08		0.40
	$	0.17	$	0.18	$	0.64

The Company records a benefit for uncertain income tax positions if the result of a tax position meets a “more likely than not” recognition threshold.  As a result of this provision, liabilities of $237 are recorded as of December 31, 2010 and 2009.  The Company expects no significant increases or decreases in unrecognized tax benefits due to changes in tax positions within one year of December 31, 2010.  Returns for the calendar years 2007 through 2010 remain subject to examination by federal and various state tax jurisdictions.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

(14)  Provision for Impairment of Investment Properties

The Company identified certain indicators of impairment for certain of its properties, such as the property’s low occupancy rate, difficulty in leasing space, and financially troubled tenants. The Company performed a cash flow analysis and determined that the carrying values of certain of its properties exceeded the respective undiscounted cash flows based upon the estimated holding period for the asset. Therefore, the Company has recorded impairment losses related to these properties consisting of the excess carrying value of the assets over their estimated fair values within the accompanying consolidated statements of operations and other comprehensive loss.

During the year ended December 31, 2010, the Company recorded investment property impairment charges as summarized below:

Location	Property Type	Impairment Date	Approximate Square Footage		Provision for Impairment of Investment Properties
Mesa, Arizona	Multi-tenant retail property	December 31, 2010	195,000		3,400
Coppell, Texas (a)	Multi-tenant retail property	September 30, 2010	91,000	$	1,851
Southlake, Texas (a)	Multi-tenant retail property	September 30, 2010	96,000		1,322
Sugarland, Texas (a)	Multi-tenant retail property	June 30, 2010	61,000		1,576
University Heights, Ohio	Multi-tenant retail property	June 30, 2010	287,000		6,281
					14,430
Discontinued Operations:
Richmond, Virginia	Single-user retail property	June 30, 2010	383,000		7,806
Hinsdale, Illinois	Single-user retail property	May 28, 2010	49,000		821
					8,627
			Total	$	23,057
	Estimated fair value of impaired properties			$	72,696
(a) Property acquired by the RioCan joint venture.  Impairment based on estimated net realizable value inclusive of projected fair value of contingent earnout proceeds.

During the year ended December 31, 2009, the Company recorded investment property impairment charges as summarized below:

Location	Property Type	Impairment Date	Approximate Square Footage		Provision for Impairment of Investment Properties
Douglasville, Georgia	Single-user retail property	December 31, 2009	110,000	$	3,200
Nashville, Tennessee	Multi-tenant retail property	December 31, 2009	293,000		6,700
Thousand Oaks, California	Multi-tenant retail property	September 30, 2009	63,000		2,700
Vacaville, California	Single-user retail property	September 30, 2009	78,000		4,000
Largo, Maryland	Multi-tenant retail property	June 30, 2009	482,000		13,100
Hanford, California	Single-user retail property	June 30, 2009	78,000		3,800
Mesa, Arizona	Multi-tenant retail property	March 31, 2009	195,000		20,400
					53,900
Discontinued Operations:
Kansas City, Missouri	Single-user retail property	September 30, 2009	88,000		500
Wilmington, North Carolina	Single-user retail property	September 30, 2009	57,000		800
Mountain Brook, Alabama	Single-user retail property	September 30, 2009	44,000		1,100
Cupertino, California	Single-user office property	September 30, 2009	100,000		8,400
					10,800
			Total	$	64,700
	Estimated fair value of impaired properties			$	208,335

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

During the year ended December 31, 2008, the Company recorded asset impairment charges as summarized below:

Location	Property Type	Impairment Date	Approximate Square Footage		Provision for Impairment of Investment Properties
Phillipsburg, New Jersey	Multi-tenant retail property	December 31, 2008	107,000	$	8,200
University Heights, Ohio	Multi-tenant retail property	December 31, 2008	287,000		12,000
Kansas City, Missouri	Multi-tenant retail property	December 31, 2008	89,000		11,000
Bakersfield, California	Single-user retail property	December 31, 2008	75,000		3,400
Highland, California	Single-user retail property	December 31, 2008	81,000		2,600
Ridgecrest, California	Single-user retail property	September 30, 2008	59,000		3,300
Turlock, California	Single-user retail property	September 30, 2008	61,000		3,000
Stroudsburg, Pennsylvania	Multi-tenant retail property	September 30, 2008	143,000		3,400
Murrieta, California	Single-user retail property	June 30, 2008	37,000		4,700
					51,600
Discontinued Operations:
Richmond, Virginia	Single-user office property	December 31, 2008	383,000		25,400
Naperville, Illinois	Single-user retail property	June 30, 2008	41,000		3,000
					28,400
			Total	$	80,000
	Estimated fair value of impaired properties			$	125,025

(15)  Fair Value Measurements

Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value of the Company’s financial instruments at December 31, 2010 and 2009.  The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date.

		December 31, 2010				December 31, 2009
			Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:
	Investment in marketable securities	$	34,230	$	34,230	$	29,117	$	29,117
	Notes receivable		8,290		8,245		8,330		8,287
Financial liabilities:
	Mortgages and notes payable	$	3,602,890	$	3,628,042	$	4,003,985	$	3,822,695
	Line of credit		154,347		154,347		107,000		107,000
	Other financings		8,477		8,477		11,887		11,887
	Co-venture obligation		51,264		55,000		50,139		55,000
	Derivative liability		2,967		2,967		3,819		3,819

The carrying values shown in the table are included in the consolidated balance sheets under the indicated captions, except for notes receivable and interest rate swaps, which are included in “Accounts and notes receivable” and “Other liabilities,” respectively.

The fair value of the financial instruments shown in the above table as of December 31, 2010 and 2009 represent the Company’s best estimates of the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in a transaction between market participants at that date.  Those fair value measurements maximize the use of observable inputs.  However, in situations where there is little, if any, market activity for the asset or liability at the

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Notes to Consolidated Financial Statements

measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability.  Those judgments are developed by the Company based on the best information available in those circumstances.

The following methods and assumptions were used to estimate the fair value of each financial instrument:

·

Investment in marketable securities: Marketable securities classified as available-for-sale are measured using quoted market prices at the reporting date multiplied by the quantity held.

·

Notes receivable: The Company estimates the fair value of its notes receivable by discounting the future cash flows of each instrument at rates that approximate those offered by lending institutions for loans with similar terms to companies with comparable risk.  The rates used are not directly observable in the marketplace, and judgment is used in determining the appropriate rate based upon the specific terms of the individual notes receivable agreement.

·

Mortgages payable: The Company estimates the fair value of its mortgages payable by discounting the future cash flows of each instrument at rates currently offered to the Company for similar debt instruments of comparable maturities by the Company’s lenders.  The rates used are not directly observable in the marketplace, and judgment is used in determining the appropriate rate for each of our individual mortgages payable based upon the specific terms of the agreement, including the term to maturity and the leverage ratio of the underlying property.

·

Line of credit: The carrying value of the Company’s line of credit approximates fair value because of the relatively short maturity of the instrument.

·

Other financings: Other financings on the consolidated balance sheets represent the equity interest of the noncontrolling member in certain consolidated entities where the LLC or LP agreement contains put/call arrangements, which grant the right to the outside owners and the Company to require each LLC or LP to redeem the ownership interest in future periods for fixed amounts.  The Company believes the fair value of other financings is that amount which is the fixed amount at which it would settle, which approximates its carrying value.

·

Co-venture obligation: The Company estimates the fair value of co-venture obligation based on the amount at which it believes the obligation will settle and the timing of such payment (See Note 10).  The fair value of the co-venture obligation includes the estimated additional amount the Company would be required to pay upon exercise of the call option.  The carrying value of the co-venture obligation includes $1,264 of cumulative co-venture obligation expense accretion relating to the estimated additional distribution.

·

Interest rate swaps: The fair value of the interest rate swaps is determined using pricing models developed based on the LIBOR swap rate and other observable market data. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements.

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Notes to Consolidated Financial Statements

Fair Value Hierarchy

GAAP specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs).  The following summarizes the fair value hierarchy:

· Level 1 Inputs – Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

· Level 2 Inputs – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

· Level 3 Inputs – Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.

The guidancerequires 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.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.  However, as of December 31, 2010 and 2009, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation.  As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The following table presents the Company’s assets and liabilities, measured on a recurring basis, and related valuation inputs within the fair value hierarchy utilized to measure fair value as of December 31, 2010 and 2009:

		Level 1	Level 2	Level 3		Total
December 31, 2010
Investment in marketable securities	$	34,230	-	-	$	34,230
Derivative liability	$	-	2,967	-	$	2,967
December 31, 2009
Investment in marketable securities	$	29,117	-	-	$	29,117
Derivative liability	$	-	3,819	-	$	3,819

There were no transfers of assets or liabilities between the levels of the fair value hierarchy during the year ended December 31, 2010.

During year ended December 31, 2010, the Company recorded asset impairment charges of $23,057 related to two of its consolidated operating properties, three consolidated operating properties that were partially sold to the RioCan joint venture and two properties that were sold.  The combined estimated fair value of these properties was $72,696.  During the year ended December 31, 2009, the Company recorded asset impairment charges of $64,700 related to seven of its consolidated operating properties and four properties that were sold.  The combined estimated fair value of these properties was $208,335.  During the year ended December 31, 2008, the Company recorded asset impairment charges of $80,000 related to nine of its consolidated operating properties and two properties that were disposed with a combined fair value of $125,025.  The Company’s estimated fair value, measured on a non-recurring basis , relating to this impairment assessment was based upon a discounted cash flow model that included all estimated cash inflows and outflows over a specific holding period or the purchase price, if applicable.  These cash flows are comprised of unobservable inputs which include contractual rental revenues and forecasted rental revenues and expenses based upon market conditions and

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Notes to Consolidated Financial Statements

expectation for growth.  Capitalization rates and discount rates utilized in this model were based upon observable rates that the Company believed to be within a reasonable range of current market rates for the property.  Based on these inputs, the Company had determined that its valuation of its consolidated operating properties were classified within Level 3 of the fair value hierarchy, except for when the estimated contract price is used, which results in Level 2 classification.

(16)  Commitments and Contingencies

The Company has acquired certain properties which have earnout components, meaning the Company did not pay for portions of these properties that were not rent producing at the time of acquisition.  The Company is obligated, under these agreements, to pay for those portions when a tenant moves into its space and begins to pay rent.  The earnout payments are based on a predetermined formula.  Each earnout agreement has a time limit regarding the obligation to pay any additional monies.  The time limits generally range from one to three years.  If, at the end of the time period allowed, certain space has not been leased and occupied, the Company will generally not have any further payment obligation to the seller.  As of December 31, 2010, the Company may pay as much as $1,400 in the future as retail space covered by earnout agreements.

The Company has previously entered into one construction loan agreement, one secured installment note and one other installment note agreement, one of which was impaired as of December 31, 2009 and written off on March 31, 2010.   In conjunction with the two remaining agreements, the Company has funded its total commitments of $8,680.  One of the two remaining loans requires monthly interest payments with the entire principal balance due at maturity.  The combined receivable balance at December 31, 2010 and 2009 was $8,290 and $8,330, respectively, net of allowances of $300 and $17,209, respectively.  In May 2010, the Company entered into an agreement related to the secured installment note that extended the maturity date from May 31, 2010 to February 29, 2012.

Although the loans obtained by the Company are generally non-recourse, occasionally, when it is deemed to be necessary, the Company may guarantee all or a portion of the debt on a full-recourse basis.  As of December 31, 2010, the Company has guaranteed $154,347 and $26,240 of the outstanding secured line of credit and mortgage loans, respectively, with maturity dates up to August 1, 2014.  As of December 31, 2010, the Company also guaranteed $28,813 representing a portion of the construction debt associated with certain of its consolidated development joint ventures.  The guarantees are released as certain leasing parameters are met.  The following table summarizes these guarantees:

Location	Joint Venture		Construction Loan Balance at December 31, 2010		Percentage/Amount Guaranteed by the Company		Guarantee Amount
Frisco, Texas	Parkway Towne Crossing	$	20,757		35%	$	7,265
Dallas, Texas	Wheatland Towne Crossing		5,712		50%		2,856
Henderson, Nevada	Lake Mead Crossing		48,949		15%		7,342
Henderson, Nevada	Green Valley Crossing		11,350	$	11,350		11,350
						$	28,813

As discussed in Note 13, on January 20, 2011, the Company filed a request for a closing agreement from the IRS, whereby the IRS would agree that the Company’s dividends paid deduction for the taxable years 2004 through 2006, the years for which the Company had positive taxable income, was sufficient for it to qualify for taxation as a REIT.  The IRS is currently reviewing the Company’s request and continues to move it through its review process.  The Company believes it will obtain a closing agreement with the IRS as the IRS has entered into similar closing agreements with other REITs.  The Company has recorded an expense of $62 representing the estimated cost plus interest to obtain such closing agreement.  The Company estimates the range of loss that is reasonably possible is from $62 if it obtains the closing agreement to approximately $155,000 if it does not obtain the closing agreement.  < /P>

(17)  Litigation

The Company previously disclosed in its Form 10-K, as amended, for the fiscal years ended December 31, 2009, 2008 and 2007, the lawsuit filed against the Company and nineteen other defendants by City of St. Clair Shores General

104

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

Employees Retirement System and Madison Investment Trust in the United States District Court for the Northern District of Illinois (the “Court”).  In the lawsuit, plaintiffs alleged that all the defendants violated the federal securities laws, and certain defendants breached fiduciary duties owed to the Company and its shareholders, in connection with the Company’s merger with its business manager/advisor and property managers as reflected in its Proxy Statement dated September 12, 2007.  

On July 14, 2010, the lawsuit was settled by the Company and the other defendants (the “Settlement”).  On November 8, 2010, the Court granted final approval of the Settlement.  Pursuant to the terms of the Settlement, 9,000 shares of common stock of the Company were transferred back to the Company from shares of common stock issued to the owners (the “Owners”) of certain entities that were acquired by the Company in its internalization transaction.  This share transfer was recorded as a capital transaction in the fourth quarter of 2010.  Pursuant to the Settlement, the Company paid the fees and expenses of counsel for class plaintiffs in the amount of $10,000, as awarded by the Court on November 8, 2010.  The Company was reimbursed $1,994 by its insurance carrier for a portion of such fees and expenses.  The Owners (who include Daniel L. Goodwin, who beneficially owne d more than 5% of the stock of the Company as of December 31, 2010, and certain directors and executive officers of the Company) also agreed to provide a limited indemnification to certain defendants who are directors and an officer of the Company if any class members opted out of the Settlement and brought claims against them.  Seven class members have opted out of the Settlement; to the Company’s knowledge, none of these seven class members have filed claims against the Company or its directors and officers.    

(18)  Subsequent Events

During the period from January 1, 2011 through the date of this filing the Company:

·

amended and restated its existing credit agreement increasing the aggregate amount to $585,000, consisting of a $435,000 senior secured revolving line of credit and a $150,000 secured term loan with a number of financial institutions;

·

filed a registration statement on Form S-11 with the Securities and Exchange Commission regarding a proposed public offering of the Company’s common stock, and

·

filed a request for a closing agreement from the IRS, whereby the IRS would agree that the Company’s dividends paid deduction for the taxable years 2004 through 2006, the years for which it had positive taxable income, was sufficient for the Company to qualify for taxation as a REIT.  The IRS is currently reviewing the Company’s request continues to move it through its review process (see Note 13).

On February 16, 2011, Borders Group, Inc. (Borders), a national retailer, filed for bankruptcy under Chapter 11. As of December 31, 2010, Borders leased approximately 220,000 square feet of space from the Company at 10 locations, which leases represented approximately $2,600 of ABR. In addition, Borders leased approximately 28,000 square feet of space at one of the Company’s unconsolidated joint venture properties, which represented $344 of ABR.  Borders has informed the Company that it intends to close stores at five locations where it leased space from the Company, representing approximately 115,000 square feet of GLA and $1,119 of ABR as of December 31, 2010. The Company evaluated its exposure to Borders as of December 31, 2010 and recorded a write-off of any straight-line rents, deferred lease costs, tenant improvements, tenant inducements and intangible assets and liabilities at those five locations. &n bsp;The amount of the write offs totaled $2,777.

105

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes to Consolidated Financial Statements

(19)  Quarterly Financial Information (unaudited)  

		2010
		Dec 31	Sep 30	Jun 30	Mar 31
Total revenue as previously reported	$	155,277	164,597	162,014	165,610
Reclassified to discontinued operations (a)		-	-	-	(442)
Adjusted total revenues	$	155,277	164,597	162,014	165,168
Net income (loss) attributable to Company shareholders	$	(3,411)	(25,527)	(38,349)	(28,556)
Net earnings (loss)  per common share-basic and diluted	$	(0.01)	(0.05)	(0.08)	(0.06)
Weighted average number of common shares    outstanding-basic and diluted		484,113	484,865	483,590	482,402
		2009
		Dec 31	Sep 30	Jun 30	Mar 31
Total revenue as previously reported	$	160,989	164,446	170,118	169,025
Reclassified to discontinued operations (a)		2,304	62	(973)	(1,392)
Adjusted total revenues	$	163,293	164,508	169,145	167,633
Net (loss) income attributable to Company shareholders	$	(44,849)	12,585	(33,391)	(46,680)
Net (loss) earnings per common share-basic and diluted	$	(0.09)	0.03	(0.07)	(0.10)
Weighted average number of common shares     outstanding-basic and diluted		481,675	481,049	479,853	478,662

 (a)

Represents revenue that has been reclassified to discontinued operations since previously reported amounts in Form 10-Q or 10-K.

106

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule II

Valuation and Qualifying Accounts

For the Years Ended December 31, 2010, 2009 and 2008

(in thousands)

			Balance at beginning of year		Charged to costs and expenses		Write-offs			Balance at end of year
Year ended December 31, 2010
Allowance for doubtful accounts		$	31,019	(a)	3,103		(24,984)	(b)	$	9,138
Year ended December 31, 2009
Allowance for doubtful accounts		$	15,510	(c)	26,944	(d)	(11,440)		$	31,014	(d)
Year ended December 31, 2008
Allowance for doubtful accounts		$	8,143	(e)	22,667		(15,769)		$	15,041
(a)	Beginning balance includes $5 for allowance for doubtful accounts related to an investment property held for sale in 2009.
(b)	Includes $16,909 related to a note receivable that was fully written off in 2010.
(c)	Beginning balance excludes $10 of allowance for doubtful accounts related to an investment property held for sale in 2009 and includes $479 for allowance for doubtful accounts related to an investment property held for sale in 2008.
(d)	Includes $16,909 related to a note receivable that was fully reserved in 2009.
(e)	Beginning balance excludes $73 of allowance for doubtful accounts related to an investment property held for sale in 2008.

107

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
23rd Street Plaza	3,192	1,300	5,319	65	1,300	5,384	6,684	1,185	2003	12/04
Panama City, FL
Academy Sports	3,275	1,230	3,752	-	1,230	3,752	4,982	882	2004	07/04
Houma, LA
Academy Sports	2,680	1,340	2,943	3	1,340	2,946	4,286	666	2004	07/04
Midland, TX
Academy Sports	3,255	1,050	3,954	6	1,050	3,960	5,010	895	2004	07/04
Port Arthur, TX
Academy Sports	4,267	3,215	3,963	-	3,215	3,963	7,178	859	2004	07/04
San Antonio, TX
Alison's Corner	2,660	1,045	5,700	78	1,045	5,778	6,823	1,411	2003	04/04
San Antonio, TX
American Express	10,884	1,400	15,370	9	1,400	15,379	16,779	3,229	2000	12/04
DePere, WI
American Express	-	2,900	10,170	8	2,900	10,178	13,078	2,137	1983	12/04
Phoenix, AZ
Arvada Connection and   Arvada Marketplace	22,000	8,125	39,366	458	8,125	39,824	47,949	9,904	1987-1990	04/04
Arvada, CO
Ashland & Roosevelt	9,905	-	21,052	274	-	21,326	21,326	4,369	2002	05/05
Chicago, IL
Azalea Square I	12,490	6,375	21,304	1,592	6,375	22,896	29,271	4,962	2004	10/04
Summerville, SC
Azalea Square III	8,703	3,280	10,348	63	3,280	10,411	13,691	1,240	2007	10/07
Summerville, SC
Bangor Parkade	17,250	11,600	13,539	3,940	11,600	17,479	29,079	2,960	2005	03/06
Bangor, ME
Battle Ridge Pavilion	10,347	4,350	11,366	(135)	4,350	11,231	15,581	1,936	1999	05/06
Marietta, GA
Beachway Plaza	6,025	5,460	10,397	210	5,460	10,607	16,067	2,176	1984 / 2004	06/05
Bradenton, FL
Bed Bath & Beyond Plaza	9,417	-	18,367	(115)	-	18,252	18,252	4,182	2004	10/04
Miami, FL
Bed Bath & Beyond Plaza	10,550	4,530	11,901	-	4,530	11,901	16,431	2,361	2000-2002	07/05
Westbury, NY
Best on the Boulevard	18,140	7,460	25,583	286	7,460	25,869	33,329	6,459	1996-1999	04/04
Las Vegas, NV
Bison Hollow	7,787	5,550	12,324	(18)	5,550	12,306	17,856	2,558	2004	04/05
Traverse City, MI
Blockbuster at Five Forks  (a)	-	440	1,018	-	440	1,018	1,458	215	2004-2005	03/05
Simpsonville, SC
Bluebonnet Parc	9,135	4,450	16,407	(61)	4,450	16,346	20,796	4,143	2002	04/04
Baton Rouge, LA

108

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Boston Commons	9,012	3,750	9,690	68	3,750	9,758	13,508	2,038	1993	05/05
Springfield, MA
Boulevard at The Capital Ctr	70,100	-	114,703	(31,003)	-	83,700	83,700	5,590	2004	09/04
Largo, MD
Boulevard Plaza	2,478	4,170	12,038	2,465	4,170	14,503	18,673	2,820	1994	04/05
Pawtucket, RI
The Brickyard	44,000	45,300	26,657	3,884	45,300	30,541	75,841	6,387	1977 / 2004	04/05
Chicago, IL
Broadway Shopping Center	10,482	5,500	14,002	1,537	5,500	15,539	21,039	2,934	1960 /1999 -	09/05
Bangor, ME									2000
Brown's Lane	5,155	2,600	12,005	518	2,600	12,523	15,123	2,606	1985	04/05
Middletown, RI
Burlington Coat Factory	5,500	2,858	5,084	1,247	2,858	6,331	9,189	1,017	1993	09/05
Elk Grove, CA
Burlington Coat Factory	5,100	3,860	4,008	1,917	3,860	5,925	9,785	853	1988	09/05
Moreno Valley, CA
Burlington Coat Factory	5,000	3,388	4,339	867	3,388	5,206	8,594	849	1981	09/05
Redlands, CA
Burlington Coat Factory	5,200	3,324	4,624	(3,487)	1,494	2,967	4,461	142	1992	09/05
Vacaville, CA
Carmax	-	6,210	7,731	-	6,210	7,731	13,941	1,653	1998	03/05
San Antonio, TX
Carrier Towne Crossing	10,992	2,750	13,662	834	2,750	14,496	17,246	2,718	1998	12/05
Grand Prairie, TX
Central Texas Marketplace	45,386	13,000	47,559	3,738	13,000	51,297	64,297	7,433	2004	12/06
Waco, TX
Centre at Laurel	27,200	19,000	8,406	16,589	19,000	24,995	43,995	4,155	2005	02/06
Laurel, MD
Century III Plaza	26,200	7,100	33,212	465	7,100	33,677	40,777	6,573	1996	06/05
West Mifflin, PA
Chantilly Crossing	16,880	8,500	16,060	1,953	8,500	18,013	26,513	3,558	2004	05/05
Chantilly, VA
Cinemark Seven Bridges	5,155	3,450	11,728	-	3,450	11,728	15,178	2,360	2000	03/05
Woodridge,  IL
Citizen's Property Insurance	5,997	2,150	7,601	6	2,150	7,607	9,757	1,420	2005	08/05
Jacksonville, FL
Clearlake Shores	6,252	1,775	7,026	1,182	1,775	8,208	9,983	1,664	2003-2004	04/05
Clear Lake, TX
Colony Square	25,488	16,700	22,775	(746)	16,700	22,029	38,729	3,697	1997	05/06
Sugar Land, TX
The Columns	12,886	5,830	19,439	62	5,830	19,501	25,331	4,511	2004	8/04 & 10/04
Jackson, TN

109

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
The Commons at Temecula	29,623	12,000	35,887	(1,912)	12,000	33,975	45,975	7,079	1999	04/05
Temecula, CA
Coram Plaza	14,671	10,200	26,178	2,041	10,200	28,219	38,419	6,063	2004	12/04
Coram, NY
Cornerstone Plaza	4,962	2,920	10,359	(166)	2,920	10,193	13,113	2,093	2004-2005	05/05
Cocoa Beach, FL
Corwest Plaza	15,244	6,900	23,851	15	6,900	23,866	30,766	6,197	1999-2003	01/04
New Britian, CT
Cost Plus Distribution Warehouse  (b)	16,300	10,075	21,483	29,493	7,104	53,947	61,051	7,641	2003	04/06
Stockton, CA
Cottage Plaza	11,201	3,000	19,158	(77)	3,000	19,081	22,081	4,138	2004-2005	02/05
Pawtucket, RI
Cranberry Square	11,499	3,000	18,736	492	3,000	19,228	22,228	4,552	1996-1997	07/04
Cranberry Township, PA
Crockett Square	5,812	4,140	7,534	53	4,140	7,587	11,727	1,365	2005	02/06
Morristown, TN
Crossroads Plaza CVS	4,563	1,040	3,780	49	1,040	3,829	4,869	781	1987	05/05
North Attelboro, MA
Crown Theater  (a)	-	7,318	954	-	7,318	954	8,272	347	2000	07/05
Hartford, CT
Cuyahoga Falls Market Center	3,816	3,350	11,083	(278)	3,350	10,805	14,155	2,277	1998	04/05
Cuyahoga Falls, OH
CVS Pharmacy	1,738	910	2,891	-	910	2,891	3,801	583	1999	06/05
Burleson, TX
CVS Pharmacy	3,668	2,096	3,863	8	2,096	3,871	5,967	689	2005	12/05
Cave Creek, AZ
CVS Pharmacy (Eckerd)	2,329	975	2,400	2	975	2,402	3,377	623	2003	12/03
Edmond, OK
CVS Pharmacy	3,475	1,460	4,455	2	1,460	4,457	5,917	953	2004	03/05
Jacksonville, FL
CVS Pharmacy	1,222	750	1,958	-	750	1,958	2,708	401	1999	05/05
Lawton, OK
CVS Pharmacy	1,867	250	2,777	-	250	2,777	3,027	585	2001	03/05
Montevallo,  AL
CVS Pharmacy	2,016	600	2,659	-	600	2,659	3,259	552	2004	05/05
Moore, OK
CVS Pharmacy (Eckerd)	3,668	932	4,370	-	932	4,370	5,302	1,143	2003	12/03
Norman, OK
CVS Pharmacy	1,947	620	3,583	-	620	3,583	4,203	722	1999	06/05
Oklahoma City, OK
CVS Pharmacy	2,761	1,100	3,254	-	1,100	3,254	4,354	686	2004	03/05
Saginaw, TX

110

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)				Gross amount carried at end of period
			Buildings and	Adjustments		Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)		Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
CVS Pharmacy	1,866	600	2,469	3		600	2,472	3,072	559	2004	10/04
Sylacauga, AL
Darien Towne Center	18,572	7,000	22,468	(503)		7,000	21,965	28,965	5,780	1994	12/03
Darien, IL
Davis Towne Crossing	3,441	1,850	5,681	1,096		1,850	6,777	8,627	1,559	2003-2004	06/04
North Richland Hills, TX
Denton Crossing	28,449	6,000	43,434	11,145		6,000	54,579	60,579	11,780	2003-2004	10/04
Denton, TX
Diebold Warehouse	7,240	-	11,190	2		-	11,192	11,192	2,257	2005	07/05
Green, OH
Dorman Center I & II	21,568	17,025	29,478	361		17,025	29,839	46,864	7,457	2003-2004	3/04 & 7/04
Spartanburg, SC
Duck Creek	12,567	4,440	12,076	5,198		4,440	17,274	21,714	2,991	2005	11/05
Bettendorf, IA
East Stone Commons	22,550	2,900	28,714	(1,486)		2,826	27,302	30,128	4,501	2005	06/06
Kingsport, TN
Eastwood Towne Center	23,324	12,000	65,067	(412)		12,000	64,655	76,655	15,831	2002	05/04
Lansing, MI
Edgemont Town Center	6,790	3,500	10,956	(193)		3,500	10,763	14,263	2,459	2003	11/04
Homewood, AL
Edwards Multiplex	9,913	-	35,421	-		-	35,421	35,421	7,359	1988	05/05
Fresno, CA
Edwards Multiplex	14,324	11,800	33,098	-		11,800	33,098	44,898	6,876	1997	05/05
Ontario, CA
Evans Towne Centre	4,461	1,700	6,425	23		1,700	6,448	8,148	1,423	1995	12/04
Evans, GA
Fairgrounds Plaza	14,455	4,800	13,490	4,354		5,431	17,213	22,644	3,540	2002-2004	01/05
Middletown, NY
Fisher Scientific  (a)	-	510	12,768	-		510	12,768	13,278	2,458	2005	06/05
Kalamazoo, MI
Five Forks  (a)	-	2,100	5,374	23		2,100	5,397	7,497	1,204	1999	12/04
Simpsonville, SC
Forks Town Center	8,825	2,430	14,836	697		2,430	15,533	17,963	3,637	2002	07/04
Easton, PA
Four Peaks Plaza	10,160	5,000	20,098	4,400		5,000	24,498	29,498	4,835	2004	03/05
Fountain Hills, AZ
Fox Creek Village	9,417	3,755	15,563		(1,081)	3,755	14,482	18,237	3,372	2003-2004	11/04
Longmont, CO
Fullerton Metrocenter	29,242	-	47,403		1,168	-	48,571	48,571	11,398	1988	06/04
Fullerton, CA

111

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Galvez Shopping Center	4,292	1,250	4,947	339	1,250	5,286	6,536	1,064	2004	06/05
Galveston, TX
The Gateway	100,559	28,664	110,945	21,917	28,664	132,862	161,526	25,703	2001-2003	05/05
Salt Lake City, UT
Gateway Pavilions	25,277	9,880	55,195	(1,517)	9,880	53,678	63,558	11,981	2003-2004	12/04
Avondale, AZ
Gateway Plaza	19,318	-	26,371	2,588	-	28,959	28,959	6,576	2000	07/04
Southlake, TX
Gateway Station	3,101	1,050	3,911	1,022	1,050	4,933	5,983	1,074	2003-2004	12/04
College Station, TX
Gateway Station II	6,268	1,530	8,146	(511)	1,530	7,635	9,165	972	2006-2007	05/07
College Station, TX
Gateway Village	25,803	8,550	39,298	3,777	8,550	43,075	51,625	10,036	1996	07/04
Annapolis, MD
Gerry Centennial Plaza  (a)	-	5,370	12,968	8,315	5,370	21,283	26,653	2,469	2006	06/07
Oswego, IL
Giant Eagle	12,154	3,425	16,868	10	3,425	16,878	20,303	3,145	2000	11/05
Columbus, OH
Gloucester Town Center	9,254	3,900	17,878	280	3,900	18,158	22,058	3,682	2003	05/05
Gloucester, NJ
GMAC Insurance Buildings	28,788	8,250	50,287	12	8,250	50,299	58,549	11,526	1980/1990	09/04
Winston-Salem, NC
Golfsmith	-	1,250	2,974	2	1,250	2,976	4,226	538	1992/2004	11/05
Altamonte Springs, FL
Governor's Marketplace	13,792	-	30,377	1,899	-	32,276	32,276	7,406	2001	08/04
Tallahassee, FL
Grapevine Crossing	12,415	4,100	16,938	156	4,100	17,094	21,194	3,533	2001	04/05
Grapevine, TX
Green's Corner	5,551	3,200	8,663	(39)	3,200	8,624	11,824	1,898	1997	12/04
Cumming, GA
Greensburg Commons	10,153	2,700	19,116	(257)	2,700	18,859	21,559	4,010	1999	04/05
Greensburg, IN
Greenwich Center  (a)	-	3,700	15,949	(9,466)	2,051	8,132	10,183	687	2002	02/06
Phillipsburg, NJ
Gurnee Town Center	15,761	7,000	35,147	86	7,000	35,233	42,233	7,969	2000	10/04
Gurnee, IL
Hartford Insurance Building	9,614	1,700	13,709	6	1,700	13,715	15,415	2,682	2005	08/05
Maple Grove, MN
Harvest Towne Center	4,163	3,155	5,085	49	3,155	5,134	8,289	1,193	1996-1999	09/04
Knoxville, TN
Henry Town Center	32,537	10,650	46,814	323	10,650	47,137	57,787	10,370	2002	12/04
McDonough, GA

112

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Heritage Towne Crossing	7,236	3,065	10,729	1,119	3,065	11,848	14,913	2,928	2002	03/04
Euless, TX
Hewitt Associates Campus	125,261	28,500	178,524	(3)	28,497	178,524	207,021	36,543	1974/1986	05/05
Lincolnshire, IL
Hickory Ridge	20,123	6,860	30,517	(41)	6,860	30,476	37,336	7,390	1999	01/04
Hickory, NC
High Ridge Crossing	5,155	3,075	9,148	(323)	3,075	8,825	11,900	1,903	2004	03/05
High Ridge, MO
Hobby Lobby  (a)	-	1,728	3,791	-	1,728	3,791	5,519	834	2004	01/05
Concord, NC
Holliday Towne Center	8,128	2,200	11,609	(367)	2,200	11,242	13,442	2,491	2003	02/05
Duncansville, PA
Home Depot Center	11,200	-	16,758	-	-	16,758	16,758	3,379	1996	06/05
Pittsburgh, PA
Home Depot Plaza	13,530	9,700	17,137	439	9,700	17,576	27,276	3,517	1992	06/05
Orange, CT
HQ Building	9,500	5,200	10,010	4,083	5,200	14,093	19,293	2,042	Redev: 04	12/05
San Antonio, TX
Humblewood Shopping Center	6,739	2,200	12,823	(51)	2,200	12,772	14,972	2,345	Renov: 05	11/05
Humble, TX
Irmo Station	5,254	2,600	9,247	75	2,600	9,322	11,922	2,045	1980 & 1985	12/04
Irmo, SC
Jefferson Commons	53,998	23,097	52,762	(32)	23,097	52,730	75,827	5,651	2005	02/08
Newport News, VA
King Philip's Crossing	10,800	3,710	19,144	268	3,710	19,412	23,122	3,543	2005	11/05
Seekonk, PA
Kohl's	6,085	1,600	8,275	5	1,600	8,280	9,880	1,497	2005	10/05
Georgetown, KY
Kohl's	4,700	2,701	5,304	(4,537)	1,289	2,179	3,468	139	1993	09/05
Hanford, CA
Kohl's	4,400	2,723	4,210	1	2,723	4,211	6,934	817	1979	09/05
Lodi, CA
Kohl's	4,800	3,864	3,533	1	3,864	3,534	7,398	686	1973	09/05
Sacramento, CA
Kohl's	6,000	5,211	3,546	1	5,211	3,547	8,758	688	1980	09/05
Sun Valley, CA
La Plaza Del Norte	17,125	16,005	37,744	850	16,005	38,594	54,599	9,507	1996/1999	01/04
San Antonio, TX
Lake Forest Crossing	4,520	2,200	5,110	116	2,200	5,226	7,426	1,073	2004	03/05
McKinney, TX
Lake Mary Pointe	1,725	2,075	4,009	99	2,075	4,108	6,183	928	1999	10/04
Lake Mary, FL

113

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total		Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)		Depreciation (E)	Constructed	Acquired
									&nb sp;
Lake Worth Towne Crossing	26,491	6,200	30,910	4,279	6,200	35,189	41,389		5,647	2005	06/06
Lake Worth, TX
Lakepointe Towne Center	21,715	4,750	23,904	875	4,750	24,779	29,529		5,005	2004	05/05
Lewisville, TX
Lakewood Towne Center	42,040	11,200	70,796	(3,382)	11,200	67,414	78,614		16,172	1988/2002-	06/04
Lakewood, WA										2003
Lincoln Plaza	41,348	13,000	46,482	21,424	13,165	67,741	80,906		11,936	2001-2004	09/05
Worchester, MA
Low Country Village I & II	10,817	2,910	16,614	(97)	2,910	16,517		19,427	3,576	2004 & 2005	06/04 & 09/05
Bluffton, SC
Lowe's/Bed, Bath & Beyond	13,783	7,423	799	(8)	7,415	799		8,214	284	2005	08/05
Butler, NJ
MacArthur Crossing	7,342	4,710	16,265	630	4,710	16,895		21,605	4,287	1995-1996	02/04
Los Colinas, TX
Magnolia Square	6,641	2,635	15,040	(1,121)	2,635	13,919		16,554	3,106	2004	02/05
Houma, LA
Manchester Meadows  (a)	-	14,700	39,738	(239)	14,700	39,499		54,199	9,286	1994-1995	08/04
Town and Country, MO
Mansfield Towne Crossing	8,892	3,300	12,195	3,340	3,300	15,535		18,835	3,431	2003-2004	11/04
Mansfield, TX
Maple Tree Place	63,400	28,000	67,361	2,363	28,000	69,724		97,724	14,323	2004-2005	05/05
Williston, VT
The Market at Clifty Crossing	13,977	1,900	16,668	659	1,847	17,380		19,227	3,065	1986/2004	11/05
Columbus, IN
The Market at Polaris	36,196	11,750	40,197	6,193	11,750	46,390		58,140	8,434	2005	11/05
Columbus, OH
Massillon Commons	7,286	4,090	12,521	280	4,090	12,801		16,891	2,657	1986/2000	04/05
Massillion, OH
Maytag Distribution Center	-	1,700	20,681	-	1,700	20,681		22,381	4,343	2004	01/05
North Liberty, IA
McAllen Shopping Center	1,623	850	2,958	(112)	850	2,846		3,696	628	2004	12/04
McAllen, TX
McDermott Towne Crossing	5,617	1,850	6,923	75	1,850	6,998		8,848	1,343	1999	09/05
Allen, TX
Mervyns	5,000	1,964	5,682	(4,088)	1,006	2,552		3,558	211	1988	09/05
Bakersfield, CA
Mervyns	5,200	2,357	5,702	1	2,357	5,703		8,060	1,107	1992	09/05
Fontana, CA
Mervyns	5,100	2,455	5,438	152	2,455	5,590		8,045	1,056	1993	09/05
Fresno, CA
Mervyns	5,300	2,308	5,870	(3,311)	1,506	3,361		4,867	278	1994	09/05
Highland, CA

114

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Mervyns	5,700	2,799	6,194	1	2,799	6,195	8,994	1,203	1992	09/05
Manteca, CA
Mervyns	5,100	4,027	3,931	2	4,027	3,933	7,960	763	1992	09/05
McAllen, TX
Mervyns	5,100	4,714	3,153	1	4,714	3,154	7,868	612	1989	09/05
Morgan Hill, CA
Mervyns	6,400	6,305	5,384	1	6,305	5,385	11,690	1,045	1982	09/05
Oceanside, CA
Mervyns	5,000	4,419	3,235	1	4,419	3,236	7,655	628	1990	09/05
Rancho Cucamonga, CA
Mervyns	3,300	1,473	4,556	(3,632)	641	1,756	2,397	162	1990	09/05
Ridgecrest, CA
Mervyns	5,400	4,734	2,997	2	4,734	2,999	7,733	582	1983	09/05
Roseville, CA
Mervyns	5,100	4,704	3,062	1	4,704	3,063	7,767	594	1990	09/05
Temecula, CA
Mervyns	4,000	1,925	4,294	(3,315)	975	1,929	2,904	178	1987	09/05
Turlock, CA
Mervyns	5,000	4,714	2,968	1	4,714	2,969	7,683	576	1982	09/05
Ventura, CA
Mesa Fiesta	-	5,800	28,302	(29,819)	957	3,326	4,283	(4)	2004	12/04
Mesa, AZ
Mid-Hudson Center	23,750	9,900	29,160	1	9,900	29,161	39,061	5,797	2000	07/05
Poughkeepsie, NY
Midtown Center	31,335	13,220	41,657	5,048	13,220	46,705	59,925	9,223	1986-1987	01/05
Milwaukee, WI
Mission Crossing	12,164	4,000	12,616	6,723	4,670	18,669	23,339	3,542	Renov:	07/05
San Antonio, TX									2003-2005
Mitchell Ranch Plaza	20,060	5,550	26,213	270	5,550	26,483	32,033	6,135	2003	08/04
New Port Richey, FL
Montecito Crossing	17,923	9,700	25,414	9,327	11,300	33,141	44,441	6,076	2004-2005	10/05
Las Vegas, NV
Mountain View Plaza I & II	14,373	5,180	18,212	72	5,180	18,284	23,464	3,325	2003 & 2006	10/05 & 11/06
Kalispell, MT
Newburgh Crossing	6,882	4,000	10,246	6	4,000	10,252	14,252	1,973	2005	10/05
Newburgh, NY
Newnan Crossing I & II	25,404	15,100	33,986	3,586	15,100	37,572	52,672	8,737	1999 & 2004	12/03 & 02/04
Newnan, GA
Newton Crossroads	3,915	3,350	6,927	(60)	3,350	6,867	10,217	1,511	1997	12/04
Covington, GA
North Ranch Pavilions  (a)	-	9,705	8,296	(4,005)	8,141	5,855	13,996	357	1992	01/04
Thousand Oaks, CA
North Rivers Towne Center	10,507	3,350	15,720	195	3,350	15,915	19,265	3,924	2003-2004	04/04
Charleston, SC

115

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Northgate North	28,650	7,540	49,078	(16,433)	7,540	32,645	40,185	8,029	1999-2003	06/04
Seattle, WA
Northpointe Plaza	24,286	13,800	37,707	1,266	13,800	38,973	52,773	9,392	1991-1993	05/04
Spokane, WA
Northwood Crossing	10,691	3,770	13,658	347	3,770	14,005	17,775	2,555	1979/2004	01/06
Northport, AL
Northwoods Center	8,921	3,415	9,475	5,896	3,415	15,371	18,786	3,284	2002-2004	12/04
Wesley Chapel, FL
Old Time Pottery	3,250	2,000	3,017	(3,372)	708	937	1,645	39	1987/1999	06/06
Douglasville, GA									& 2005
Orange Plaza (Golfland Plaza)	6,200	4,350	4,834	996	4,350	5,830	10,180	1,093	1995	05/05
Orange, CT
The Orchard	12,229	3,200	17,151	14	3,200	17,165	20,365	3,368	2004-2005	07/05 & 9/05
New Hartford, NY
Pacheco Pass Phase I & II	29,088	13,420	32,785	(1,003)	13,400	31,802	45,202	5,343	2004 & 2006	07/05 & 06/07
Gilroy, CA
Page Field Commons	-	-	43,355	782	-	44,137	44,137	9,153	1999	05/05
Fort Myers, FL
Paradise Valley Marketplace	9,615	6,590	20,425	12	6,590	20,437	27,027	5,020	2002	04/04
Phoenix, AZ
Pavillion at Kings Grant I & II	16,000	10,274	12,392	10,713	10,274	23,105	33,379	3,615	2002-2003	12/03 & 06/06
Concord, NC									& 2005
Peoria Crossings I & II	20,246	6,995	32,816	3,722	8,495	35,038	43,533	8,445	2002-2003	03/04 & 05/05
Peoria, AZ									& 2005
PetSmart Distribution Center	23,731	1,700	38,808	(1,098)	1,700	37,710	39,410	6,759	2004-2005	07/05
Ottawa, IL
Phenix Crossing	4,362	2,600	6,776	105	2,600	6,881	9,481	1,525	2004	12/04
Phenix City, AL
Pine Ridge Plaza	11,384	5,000	19,802	1,672	5,000	21,474	26,474	4,987	1998-2004	06/04
Lawrence, KS
Placentia Town Center	11,598	11,200	11,751	101	11,200	11,852	23,052	2,628	1973/2000	12/04
Placentia, CA
Plaza at Marysville	9,638	6,600	13,728	157	6,600	13,885	20,485	3,236	1995	07/04
Marysville, WA
Plaza at Riverlakes	8,937	5,100	10,824	(31)	5,100	10,793	15,893	2,444	2001	10/04
Bakersfield, CA
Plaza Santa Fe II	15,037	-	28,588	669	-	29,257	29,257	6,865	2000-2002	06/04
Santa Fe, NM
Pleasant Run	14,373	4,200	29,085	2,502	4,200	31,587	35,787	6,817	2004	12/04
Cedar Hill, TX
Powell Center	8,390	5,490	7,448	(43)	5,490	7,405	12,895	1,022	2001	04/07
Lewis Center, OH
Preston Trail Village	13,595	7,139	13,670	793	7,139	14,463	21,602	1,247	1978/2008	09/08
Dallas, TX

116

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Promenade at Red Cliff	8,426	5,340	12,665	143	5,340	12,808	18,148	3,209	1997	02/04
St. George, UT
Pro-Ranch Market	5,000	3,339	4,348	1	3,339	4,349	7,688	844	1981	9/05
El Paso, TX
Quakertown	8,290	2,400	9,246	1	2,400	9,247	11,647	1,810	2004-2005	09/05
Quakertown, PA
Rasmussen College	3,053	850	4,049	6	850	4,055	4,905	805	2005	08/05
Brooklyn Park, MN
Rave Theater	17,889	3,440	22,111	2,881	3,440	24,992	28,432	4,510	2005	12/05
Houston, TX
Raytheon Facility	11,841	650	18,353	2	650	18,355	19,005	3,645	Rehab: 2001	08/05
State College, PA
Red Bug Village	4,546	1,790	6,178	82	1,790	6,260	8,050	1,195	2004	12/05
Winter Springs, FL
Reisterstown Road Plaza	45,793	15,800	70,372	7,058	15,800	77,430	93,230	17,885	1986/2004	08/04
Baltimore, MD
Ridge Tool Building	4,543	415	6,799	1	415	6,800	7,215	1,249	2005	09/05
Cambridge, OH
Rite Aid Store (Eckerd), Sheridan Dr.	2,903	2,000	2,722	-	2,000	2,722	4,722	516	1999	11/05
Amherst, NY
Rite Aid Store (Eckerd), Transit Road	3,243	2,500	2,764	2	2,500	2,766	5,266	524	2003	11/05
Amherst, NY
Rite Aid Store (Eckerd)	-	900	1,215	-	900	1,215	2,115	249	1999-2000	05/05
Atlanta, GA
Rite Aid Store (Eckerd), East Main St.	2,855	1,860	2,786	-	1,860	2,786	4,646	528	2004	11/05
Batavia, NY
Rite Aid Store (Eckerd), West Main St.	2,547	1,510	2,627	-	1,510	2,627	4,137	497	2001	11/05
Batavia, NY
Rite Aid Store (Eckerd), Ferry St.	2,198	900	2,677	-	900	2,677	3,577	507	2000	11/05
Buffalo, NY
Rite Aid Store (Eckerd) - Main St.	2,174	1,340	2,192	-	1,340	2,192	3,532	415	1998	11/05
Buffalo, NY
Rite Aid Store (Eckerd)	3,091	1,968	2,575	1	1,968	2,576	4,544	488	2004	11/05
Canandaigua, NY
Rite Aid Store (Eckerd)	1,758	750	2,042	-	750	2,042	2,792	412	1999	06/05
Chattanooga, TN
Rite Aid Store (Eckerd)	2,117	2,080	1,393	-	2,080	1,393	3,473	264	1999	11/05
Cheektowaga, NY
Rite Aid Store (Eckerd)	3,222	3,000	3,955	22	3,000	3,977	6,977	816	2005	05/05
Colesville, MD
Rite Aid Store (Eckerd)	1,735	900	2,377	-	900	2,377	3,277	589	2003-2004	06/04
Columbia, SC
Rite Aid Store (Eckerd)	1,388	600	2,033	1	600	2,034	2,634	491	2003-2004	06/04
Crossville, TN

117

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Rite Aid Store (Eckerd)	1,665	900	2,475	-	900	2,475	3,375	466	1999	11/05
Grand Island, NY
Rite Aid Store (Eckerd)	1,926	470	2,657	-	470	2,657	3,127	503	1998	11/05
Greece, NY
Rite Aid Store (Eckerd)	1,665	1,050	2,047	1	1,050	2,048	3,098	494	2003-2004	06/04
Greer, SC
Rite Aid Store (Eckerd)	3,400	1,550	3,954	6	1,550	3,960	5,510	786	2004	08/05
Hellertown, PA
Rite Aid Store (Eckerd)	2,409	2,060	1,873	-	2,060	1,873	3,933	355	2002	11/05
Hudson, NY
Rite Aid Store (Eckerd)	2,877	1,940	2,736	-	1,940	2,736	4,676	518	2002	11/05
Irondequoit, NY
Rite Aid Store (Eckerd)	1,983	700	2,960	1	700	2,961	3,661	714	2003-2004	06/04
Kill Devil Hills, NC
Rite Aid Store (Eckerd)	1,786	1,710	1,207	-	1,710	1,207	2,917	229	1999	11/05
Lancaster, NY
Rite Aid Store (Eckerd)	3,400	975	4,369	6	975	4,375	5,350	869	2004	08/05
Lebanon, PA
Rite Aid Store (Eckerd)	2,716	1,650	2,788	-	1,650	2,788	4,438	528	2002	11/05
Lockport, NY
Rite Aid Store (Eckerd)	1,682	820	1,935	-	820	1,935	2,755	366	2000	11/05
North Chili, NY
Rite Aid Store (Eckerd)	2,452	1,190	2,809	-	1,190	2,809	3,999	532	1999	11/05
Olean, NY
Rite Aid Store (Eckerd)	3,322	1,000	4,328	5	1,000	4,333	5,333	860	2004	08/05
Punxsutawney, PA
Rite Aid Store (Eckerd), Culver Rd.	2,376	1,590	2,279	-	1,590	2,279	3,869	432	2001	11/05
Rochester, NY
Rite Aid Store (Eckerd), Lake Ave.	3,210	2,220	3,025	2	2,220	3,027	5,247	573	2001	11/05
Rochester, NY
Rite Aid Store (Eckerd)	2,370	800	3,075	-	800	3,075	3,875	582	2000	11/05
Tonawanda, NY
Rite Aid Store (Eckerd), Harlem Road	2,770	2,830	1,683	-	2,830	1,683	4,513	319	2003	11/05
West Seneca, NY
Rite Aid Store (Eckerd), Union Rd.	2,395	1,610	2,300	-	1,610	2,300	3,910	436	2000	11/05
West Seneca, NY
Rite Aid Store (Eckerd)	1,372	810	1,434	-	810	1,434	2,244	271	1997	11/05
Yorkshire, NY
Riverpark Phase IIA	6,435	1,800	8,542	(57)	1,800	8,485	10,285	1,350	2006	09/06
Sugarland, TX
Rivery Town Crossing	8,018	2,900	6,814	296	2,900	7,110	10,010	1,070	2005	10/06
Georgetown, TX
Royal Oaks Village II	8,550	2,200	11,859	(141)	2,200	11,718	13,918	2,225	2004-2005	11/05
Houston, TX

118

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Saucon Valley Square	8,921	3,200	12,642	(2,030)	3,200	10,612	13,812	2,506	1999	09/04
Bethlehem, PA
Shaws Supermarket  (a)	-	2,700	11,532	(298)	2,700	11,234	13,934	2,973	1995	12/03
New Britain, CT
Shoppes at Lake Andrew I & II	15,383	4,000	22,996	199	4,000	23,195	27,195	5,031	2003	12/04
Viera, FL
Shoppes at Park West	5,551	2,240	9,357	(44)	2,240	9,313	11,553	2,121	2004	11/04
Mt. Pleasant, SC
Shoppes at Quarterfield	5,101	2,190	8,840	66	2,190	8,906	11,096	2,253	1999	01/04
Severn, MD
Shoppes at Stroud (a)	-	5,711	27,692	(2,937)	5,111	25,355	30,466	2,124	2007-2008	01/08
Stroudsburg, PA
Shoppes of New Hope	3,819	1,350	11,045	(301)	1,350	10,744	12,094	2,574	2004	07/04
Dallas, GA
Shoppes of Prominence Point I & II	9,784	3,650	12,652	(18)	3,650	12,634	16,284	2,921	2004 & 2005	06/04 & 09/05
Canton, GA
Shoppes of Warner Robins	5,386	1,110	11,258	(42)	1,110	11,216	12,326	2,267	2004	06/05
Warner Robins, GA
Shops at 5	40,179	8,350	59,570	77	8,350	59,647	67,997	12,201	2005	06/05
Plymouth, MA
The Shops at Boardwalk	7,625	5,000	30,540	(1,510)	5,000	29,030	34,030	6,960	2003-2004	07/04
Kansas City, MO
Shops at Forest Commons	4,799	1,050	6,133	(116)	1,050	6,017	7,067	1,344	2002	12/04
Round Rock, TX
The Shops at Legacy	61,100	8,800	108,940	11,046	8,800	119,986	128,786	15,468	2002	06/07
Plano, TX
Shops at Park Place	8,176	9,096	13,175	527	9,096	13,702	22,798	3,756	2001	10/03
Plano, TX
South Towne Crossing	8,818	1,600	9,391	2,050	1,600	11,441	13,041	1,790	2005	06/06
Burleson, TX
Southgate Plaza	4,163	2,200	9,229	38	2,200	9,267	11,467	1,975	1998-2002	03/05
Heath, OH
Southlake Town Square I - VII  (b)	149,054	41,490	187,354	17,208	41,490	204,562	246,052	35,788	1998-2004	12/04, 5/07,
Southlake, TX									& 2007	9/08 & 3/09
Southpark Meadows II  (a)	-	25,000	57,865	36,500	25,000	94,365	119,365	10,747	2006-2007	03/07
Austin, TX
Southwest Crossing	14,691	4,750	19,679	145	4,750	19,824	24,574	4,051	1999	06/05
Fort Worth, TX
Stanley Works / Mac Tools  (a)	-	1,900	7,624	-	1,900	7,624	9,524	1,579	2004	01/05
Westerville, OH
Stateline Station	17,600	6,500	23,780	(14,998)	3,829	11,453	15,282	986	2003-2004	03/05
Kansas City, MO
Stilesboro Oaks	5,313	2,200	9,426	(45)	2,200	9,381	11,581	2,064	1997	12/04
Acworth, GA

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

		Initial Cost (A)			Gross amount carried at end of period
			Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name	Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
Stonebridge Plaza	4,278	1,000	5,783	60	1,000	5,843	6,843	1,170	1997	08/05
McKinney, TX
Stony Creek I	8,921	6,735	17,564	(212)	6,735	17,352	24,087	4,711	2003	12/03
Noblesville, IN
Stony Creek II	4,279	1,900	5,106	22	1,900	5,128	7,028	968	2005	11/05
Noblesville, IN
Stop & Shop	7,349	2,650	11,491	6	2,650	11,497	14,147	2,173	Renov: 2005	11/05
Beekman, NY
Target South Center	5,690	2,300	8,760	80	2,300	8,840	11,140	1,677	1999	11/05
Austin, TX
Tim Horton Donut Shop	-	212	30	-	212	30	242	10	2004	11/05
Canandaigua, NY
Tollgate Marketplace	43,633	8,700	61,247	312	8,700	61,559	70,259	14,279	1979/1994	07/04
Bel Air, MD
Town Square Plaza	18,715	9,700	18,264	1,469	9,700	19,733	29,433	3,602	2004	12/05
Pottstown, PA
Towson Circle	12,772	9,050	17,840	1,295	9,050	19,135	28,185	4,391	1998	07/04
Towson, MD
Traveler's Office Building	4,865	650	7,001	822	1,079	7,394	8,473	1,285	2005	01/06
Knoxville, TN
Trenton Crossing	16,951	8,180	19,262	3,065	8,180	22,327	30,507	4,598	2003	02/05
McAllen, TX
University Square	29,965	1,770	48,068	(42,255)	986	6,597	7,583	171	2003	05/05
University Heights, OH
University Town Center	4,659	-	9,557	69	-	9,626	9,626	2,146	2002	11/04
Tuscaloosa, AL
Vail Ranch Plaza	11,263	6,200	16,275	(4)	6,200	16,271	22,471	3,384	2004-2005	04/05
Temecula, CA
The Village at Quail Springs	5,452	3,335	7,766	46	3,335	7,812	11,147	1,677	2003-2004	02/05
Oklahoma City, OK
Village Shoppes at Gainesville	25,148	4,450	36,592	727	4,450	37,319	41,769	7,175	2004	09/05
Gainsville, GA
Village Shoppes at Simonton	3,525	2,200	10,874	(222)	2,200	10,652	12,852	2,522	2004	08/04
Lawrenceville, GA
Walgreens	3,129	450	5,074	-	450	5,074	5,524	1,021	2000	04/05
Northwoods, MO
Walgreens	2,294	550	3,580	-	550	3,580	4,130	754	1999	04/05
West Allis, WI
Wal-Mart Supercenter  (a)	-	1,756	10,914	-	1,756	10,914	12,670	2,567	1999	07/04
Blytheville, AR
Walter's Crossing	20,626	14,500	16,914	(4)	14,500	16,910	31,410	2,929	2005	07/06
Tampa, FL
Watauga Pavillion	14,500	5,185	27,504	83	5,185	27,587	32,772	6,706	2003-2004	05/04
Watauga, TX

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Schedule III

Real Estate and Accumulated Depreciation

December 31, 2010

(in thousands)

			Initial Cost (A)			Gross amount carried at end of period
				Buildings and	Adjustments	Land and	Buildings and	Total	Accumulated	Date	Date
Property Name		Encumbrance	Land	Improvements	to Basis ( C)	Improvements	Improvements (D)	(B, D)	Depreciation (E)	Constructed	Acquired
West Town Market		5,458	1,170	10,488	(35)	1,170	10,453	11,623	2,104	2004	06/05
Fort Mill, SC
Wickes		5,433	3,200	5,530	(5,227)	3,200	303	3,503	28	2005	10/05
Murrieta, CA
Wilton Square		28,560	8,200	35,538	13	8,200	35,551	43,751	7,060	2000	07/05
Saratoga Springs, NY
Winchester Commons		5,948	4,400	7,471	(29)	4,400	7,442	11,842	1,688	1999	11/04
Memphis, TN
Wrangler		11,300	1,219	16,251	3	1,219	16,254	17,473	3,824	1993	07/04
El Paso, TX
Zurich Towers		74,186	7,900	137,096	13	7,900	137,109	145,009	28,442	1986-1990	11/04
Schaumburg, IL
	$	3,367,205	1,366,859	5,036,858	129,991	1,348,538	5,185,170	6,533,708	1,029,360
Development Properties
Bellevue Mall		-	3,056	-	-	3,056	-	3,056	-
Nashville, TN
Green Valley		-	-	-	104	-	104	104	2
Henderson, NV
Lake Mead Crossing		-	17,795	49,924	994	17,795	50,918	68,713	2,864
Henderson, NV
Parkway Towne Crossing		-	5,494	19,607	2,838	5,494	22,445	27,939	2,486
Frisco, TX
Wheatland Towne Crossing		-	272	355	-	272	355	627	57
Dallas, TX
Subtotal Development Properties		-	26,617	69,886	3,936	26,617	73,822	100,439	5,409
Development in Progress		86,768	38,804	48,291	-	38,804	48,291	87,095
Total Investment Properties		3,453,973	1,432,280	5,155,035	133,927	1,413,959	5,307,283	6,721,242	1,034,769
(a)  This property is secured as collateral under the Company's line of credit agreement.
(b)  A portion of this property is secured as collateral under the Company's line of credit agreement.

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INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Notes:

(A)	The initial cost to the Company represents the original purchase price of the property, including amounts incurred subsequent to acquisition which were contemplated at the time the property was acquired.
(B)	The aggregate cost of real estate owned at December 31, 2010 for Federal income tax purposes was approximately $6,791,738 (unaudited).
(C)	Adjustments to basis include payments received under master lease agreements as well as additional tangible costs associated with the investment properties, including any earnout of tenant space.
(D)	Reconciliation of real estate owned:

		2010		2009		2008
Balance at January 1	$	6,969,951	$	7,365,167	$	7,275,107
Purchase of investment property		58		25,195		215,228
Sale of investment property		(255,764)		(313,062)		-
Property held for sale		-		(41,689)		(54,839)
Provision for asset impairment		(32,318)		(101,543)		(98,915)
Payments received under master leases		(789)		(1,231)		(3,067)
Acquired in-place lease intangibles		45,551		40,868		27,507
Acquired above market lease intangibles		3,171		4,689		5,270
Acquired below market lease intangibles		(8,618)		(8,443)		(1,124)
Balance at December 31	$	6,721,242	$	6,969,951	$	7,365,167

(E) Reconciliation of accumulated depreciation:

		2010		2009		2008
Balance at January 1	$	866,169	$	733,661	$	547,953
Depreciation expense		212,832		218,029		251,665
Sale of investment property		(22,653)		(35,006)		-
Property held for sale		-		(112)		(6,108)
Provision for asset impairment		(8,071)		(38,553)		(16,765)
Write offs due to early lease termination		(11,568)		(11,850)		(43,084)
Other disposals		(1,940)		-		-
Balance at December 31	$	1,034,769	$	866,169	$	733,661

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Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating us, including our consolidated subsidiaries, is made known to the officers who certify our financial reports and to the members of senior management and the Board of Directors.

Based on management’s evaluation as of December 31, 2010, our chief executive officer, president, chief financial officer and treasurer and chief accounting officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective to ensure that the information required to be disclosed by us in our reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and is accumulated and communicated to our management, including our chief executive officer, president, chief financial officer and treasurer and our chief accounting officer to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes to our internal controls over financial reporting during the fiscal quarter ended December 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Management’s Report on Internal Control Over Financial Reporting  

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2010.  The effectiveness of our internal control over financial reporting as of December 31, 2010 has been audited by Deloitte & Touche LLP, an Independent Registered Public Accounting Firm, as stated in their report which is included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Inland Western Retail Real Estate, Inc.:

We have audited the internal control over financial reporting of Inland Western Retail Real Estate, Inc., and subsidiaries (the “Company”) as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally acc epted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2010 of the Company and our report dated February 23, 2011 expressed an unqualified opinion on those financial statements and financial statement schedules and included an explanatory paragraph relating to the change in method of accounting for noncontrolling interests.

/s/ Deloitte & Touche LLP

Chicago, Illinois

February 23, 2011

124

Item 9B.  Other Information

None.

PART III

Item 10.  Directors, Executive Officers and Corporate Governance of the Registrant

Directors and Executive Officers

Currently, our board of directors consists of eight directors.  Our board of directors has determined that seven of our directors are independent directors for purposes of applicable New York Stock Exchange (NYSE) rules.  Pursuant to our charter, our directors are elected annually by our shareholders to serve until the next annual meeting or until their successors are duly elected and qualify.  Our officers serve at the discretion of our board of directors.

Certain information regarding our executive officers and directors is set forth below:

Name	Age*	Position
Steven P. Grimes	44	President, Chief Executive Officer, Chief Financial Officer and Treasurer
Dennis K. Holland	58	Executive Vice President, General Counsel and Secretary
Shane C. Garrison	41	Executive Vice President and Chief Investment Officer
Niall J. Byrne	54	Executive Vice President and President of Property Management
James W. Kleifges	60	Executive Vice President and Chief Accounting Officer
Gerald M. Gorski**	67	Director and Chairman of the Board
Kenneth H. Beard**	71	Director
Frank A. Catalano, Jr.**	49	Director
Paul R. Gauvreau**	71	Director
Brenda G. Gujral	68	Director
Richard P. Imperiale**	51	Director
Kenneth E. Masick**	65	Director
Barbara A. Murphy**	73	Director

  *

As of January 1, 2011

**

Determined by our board of directors to be an independent director within the meaning of the NYSE listing standards.

The following are biographical summaries of the experience of our executive officers and directors.

Steven P. Grimes serves as our President, Chief Executive Officer, Chief Financial Officer and Treasurer. Mr. Grimes has served in these positions since October 13, 2009.  Previously, Mr. Grimes served as our Chief Operating Officer and Chief Financial Officer since the internalization of our management on November 15, 2007.  Prior to our internalization, Mr. Grimes served as Principal Financial Officer and Treasurer and the Chief Financial Officer of Inland Western Retail Real Estate Advisory Services, Inc., which was our former business manager/advisor, since February 2004.  Prior to joining our former business manager/advisor, Mr. Grimes served as a Director with Cohen Financial, a mortgage brokerage firm, and as a senior manager with Deloitte in their Chicago-based real estate practice, where he was a national deputy real estate industry leader.  Mr. Grimes is also an active member of various real e state trade associations, including the Real Estate Roundtable.  Mr. Grimes received his B.S. in Accounting from Indiana University and is a Certified Public Accountant.

125

Dennis K. Holland serves as our Executive Vice President, General Counsel and Secretary.  In this role, Mr. Holland manages our legal department and is involved in all aspects of our business, including real estate acquisitions and financings, sales, securities laws, corporate governance matters, leasing and tenant matters and litigation management.  Mr. Holland has served in these positions since the internalization of our management on November 15, 2007.  Prior to that time, he served as Associate Counsel of The Inland Real Estate Group, Inc., an affiliate of our former business manager/advisor, since December 2003.  Prior to December 2003, Mr. Holland served as Deputy General Counsel of Heller Financial, Inc., and General Counsel of its real estate group, and in a business role with GE Capital following its acquisition of Heller Financial.  Mr. Holland received his B.S. in Economics fr om Bradley University in 1974 and a J.D. from the John Marshall Law School in 1979.  

Shane C. Garrison serves as our Executive Vice President and Chief Investment Officer.   In this role, Mr. Garrison is responsible for several operating functions within the Company, including leasing, construction operations, joint ventures, and overall asset management, which includes acquisitions and dispositions. Mr. Garrison has served in this position since the internalization of our management on November 15, 2007.  Prior to that time, Mr. Garrison served as Vice President of Asset Management of Inland US Management LLC, which was a property management company affiliated with our former business manager/advisor, since 2004.  In this prior role, Mr. Garrison underwrote over $1.2 billion of assets acquired by us, and went on to spearhead our development and joint venture initiatives. Previously, Mr. Garrison had served as head of asset management for ECI Properti es, a small boutique owner of industrial and retail properties, and the general manager of the Midwest region for Circuit City, a large electronics retailer. Mr. Garrison received his B.S. in Business Administration from Illinois State University and an MBA in Real Estate Finance from DePaul University.

Niall J. Byrne serves as our Executive Vice President and President of Property Management. In this role, Mr. Byrne is responsible for the oversight of all the property management functions for our portfolio. Mr. Byrne has served in this position since the internalization of our management on November 15, 2007.  Prior to that time, he served as a Senior Vice President of Inland Holdco Management LLC, which was a property management company affiliated with our former business manager/advisor, since 2005. In this role, Mr. Byrne was responsible for the oversight of all of the property management, leasing and marketing activities for our portfolio and was involved in our development, acquisitions and joint venture initiatives. Previously, from 2004 to 2005, Mr. Byrne served as Vice President of Asset Management of American Landmark Properties, Ltd., a private real estate company, where he was responsible for a large comm ercial and residential portfolio of properties.  Prior to joining American Landmark Properties, Ltd., Mr. Byrne served as Senior Vice President/Director of Operations for Providence Management Company, LLC, or PMC Chicago, from 2000 to 2004.  At PMC Chicago, he oversaw all aspects of property operations, daily management and asset management functions for an 8,000-unit multi-family portfolio.  Prior to joining PMC Chicago, Mr. Byrne also had over fifteen years of real estate experience with the Chicago-based Habitat Company and with American Express/Balcor and five years of public accounting experience. Mr. Byrne received his B.S. in Accounting from DePaul University and is a Certified Public Accountant.

James W. Kleifges serves as our Executive Vice President and Chief Accounting Officer. Mr. Kleifges has served in this position since the internalization of our management on November 15, 2007.  Prior to that time, he served as Chief Accounting Officer of Inland Western Retail Real Estate Advisory Services, Inc., our former business manager/advisor, since March 2007.  Mr. Kleifges served as Vice President, Chief Financial Officer, Treasurer and Assistant Secretary of Inland Retail Real Estate Trust, Inc., a publicly held retail real estate investment trust, from January 2005 until the acquisition of the company by a third party in February 2007 in a transaction valued in excess of $6 billion.  From August 2004 through December 2004, Mr. Kleifges was the Vice President, Corporate Controller for the external business manager/advisor of Inland Retail Real Estate Trust, Inc.  From April 1999 to January 200 4, Mr. Kleifges was Vice President/Corporate Controller of Prime Group Realty Trust, an office and industrial real estate investment trust based in Chicago, Illinois, with assets in excess of $1 billion.  Prior to joining Prime Group, Mr. Kleifges held senior financial and operational positions in various private and public real estate companies located in Chicago, Illinois and Denver, Colorado.  Mr. Kleifges also was a Senior Manager with KPMG in Chicago, Illinois completing a career in public accounting from June 1972 to December 1982.  Mr. Kleifges earned his B.A. in Accounting from St. Mary’s University in Winona, Minnesota and has been a Certified Public Accountant since 1974.

126

Gerald M. Gorski serves as a Director and Chairman of the Board.  Mr. Gorski has been one of our directors since July 1, 2003.  He has been a Partner in the law firm of Gorski & Good LLP, Wheaton, Illinois since 1978.  Mr. Gorski’s practice is focused on governmental law, and he represents numerous units of local government in Illinois.  Mr. Gorski has served as a Special Assistant State’s Attorney and Special Assistant Attorney General in Illinois.  He received a B.A from North Central College with majors in Political Science and Economics and a J.D. from DePaul University Law School.  Mr. Gorski serves as the Vice Chairman of the Board of Commissioners for the DuPage Airport Authority.  Further, Mr. Gorski has also served as Chairman of the Board of Directors of the DuPage National Technology Park.  He has written numerous articles on various legal issues facing Illinois municipalities and has been a speaker at a number of municipal law conferences.

Kenneth H. Beard serves as a Director. Mr. Beard has been one of our directors since our inception on March 5, 2003.  He is President and Chief Executive Officer of KHB Group, Inc. and Midwest Mechanical Construction, mechanical engineering and construction companies.  From 1999 to 2002, he was President and Chief Executive Officer of Exelon Services, a subsidiary of Exelon Corporation that engaged in the design, installation and servicing of heating, ventilation and air conditioning facilities for commercial and industrial customers and provided energy-related services.  From 1974 to 1999, Mr. Beard was President and Chief Executive Officer of Midwest Mechanical, Inc., a heating, ventilation and air conditioning construction and service company that he founded in 1974.  From 1964 to 1974, Mr. Beard was employed by The Trane Company, a manufacturer of heating, ventilating and air conditioning equipment. &nb sp;Mr. Beard holds an MBA and BSCE from the University of Kentucky and is a licensed mechanical engineer.  He is past chairman of the foundation board of the Wellness House in Hinsdale, Illinois, a cancer support organization and serves on the Dean’s Advisory Council of the University of Kentucky, School of Engineering.  Mr. Beard is a past member of the Oak Brook, Illinois, Plan Commission (1981 to 1991) and a past board member of Harris Bank, Hinsdale, Illinois (1985 to 2004).

Frank A. Catalano, Jr. serves as a Director.  Mr. Catalano has been one of our directors since our inception on March 5, 2003.  Mr. Catalano’s experience also includes mortgage banking. Since February 1, 2008, he has been with Gateway Funding Diversified Mortgage Services, L.P., a residential mortgage banking company, as their Regional Vice President. From 2002 until August 2007, he was a Vice President of American Home Mortgage Company.  He also was President and Chief Executive Officer of CCS Mortgage, Inc. from 1995 through 2000.  Since 1999, Mr. Catalano has also served as President of Catalano & Associates.  Catalano & Associates is a real estate company that engages in brokerage and property management services and the rehabilitation and leasing of office buildings.  Mr. Catalano is currently a member of the Elmhurst Memorial Healthcare Board of Governors and formerly serve d as the chairman of the board of the Elmhurst Chamber of Commerce.  Mr. Catalano holds a mortgage banker’s license.

Paul R. Gauvreau serves as a Director.  Mr. Gauvreau has been one of our directors since our inception on March 5, 2003.  He is the retired Chief Financial Officer, Financial Vice President and Treasurer of Pittway Corporation, a NYSE-listed manufacturer and distributor of professional burglar and fire alarm systems and equipment from 1966 until its sale to Honeywell, Inc. in 2001.  He was President of Pittway’s non-operating real estate and leasing subsidiaries through 2001.  He also was a financial consultant to Honeywell, Inc., Genesis Cable, L.L.C. and ADUSA, Inc.  Additionally, he was a director and audit committee member of Cylink Corporation, a NASDAQ Stock Market listed manufacturer of voice and data security products from 1998 until its merger with Safenet, Inc. in February 2003.  Mr. Gauvreau holds an MBA from the University of Chicago and a BSC from Loyola University of Chicago. &n bsp;He is on the Board of Trustees, Chairman of the Finance Committee and Treasurer of Benedictine University, Lisle, Illinois and a member of the Board of Directors of the Children’s Brittle Bone Foundation, Pleasant Prairie, Wisconsin.

Brenda G. Gujral serves as a Director.  Ms. Gujral has been one of our Directors since our inception and previously served as our Chief Executive Officer from June 2005 until the internalization of our management on November 15, 2007.  She is the Chief Executive Officer of Inland Real Estate Investment Corporation, or IREIC, which is a sponsor of real estate investment trusts and limited partnerships that is affiliated with The Inland Group, Inc.  Ms. Gujral has served as the Chief Executive Officer of IREIC since January 2008 and as its President from January 1998 through January 2011 and from July 1987 through September 1992.  Ms. Gujral currently serves as a director of Inland American Real Estate Trust, Inc. and Inland Diversified Real Estate Trust, Inc., and previously served as a director of Inland Retail Real Estate Trust, Inc. from its inception in September 1998 until it was acquired in February 20 07.  Prior to joining The Inland Group, Inc., she worked for the Land Use Planning Commission establishing an office in Portland, Oregon, to implement land use legislation for that state.  She is a graduate of California State University.  She holds Series 7, 22, 39 and 63 certifications from the Financial Industry Regulatory Authority and is a licensed real estate salesperson.  

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Richard P. Imperiale serves as a Director.  Mr. Imperiale has been a Director since January 2008.  Mr. Imperiale is President and founder of Forward Uniplan Advisors, Inc., a Milwaukee, Wisconsin based investment advisory holding company that, together with its affiliates, manages and advises over $500 million in client accounts.  Forward Uniplan Advisors, Inc. was founded by Mr. Imperiale in 1984 and specializes in managing equity, REIT and specialty portfolios for clients.  Mr. Imperiale started his career as a credit analyst for the First Wisconsin National Bank (now U.S. Bank).  In 1983, Mr. Imperiale joined B.C. Ziegler & Company, a Midwest regional brokerage firm where he was instrumental in the development of portfolio strategies for one of the first hedged municipal bond mutual funds in the country. Mr. Imperiale is widely quoted in local and national media on matters pertaining to inv estments and authored the book Real Estate Investment Trusts: New Strategies For Portfolio Management, published by John Wiley & Sons, 2002.  He attended Marquette University Business School where he received a B.S. in Finance.

Kenneth E. Masick serves as a Director.  Mr. Masick has been one of our directors since January 2008. He retired from Wolf & Company LLP, certified public accountants, in April 2009, having been there as a partner since its formation in 1978.  That firm, one of the largest in the Chicago area, specializes in audit, tax and consulting services to privately owned businesses.  Mr. Masick was partner-in-charge of the firm’s audit and accounting department and was responsible for the firm’s quality control.  His accounting experience also includes feasibility studies and due diligence activities with acquisitions.  Mr. Masick has been in public accounting since his graduation from Southern Illinois University in 1967. Mr. Masick also holds Series 7, 24, 27 and 63 licenses from Financial Industry Regulatory Authority.  He also was treasurer and director of Wolf Financial Management LL C, a securities broker-dealer firm.  Mr. Masick was a director of Inland Retail Real Estate Trust, Inc. from December 1998 until it was acquired in February 2007.

Barbara A. Murphy serves as a Director.  Ms. Murphy has been one of our directors since July 1, 2003.  Ms. Murphy is a former Chairman and current Committeeman for The Milton Township Republican Central Committee.  After serving for twenty years, she recently retired as a Trustee of Milton Township, which is an elected political position.  Ms. Murphy was also the co-owner of a small retail business.  

Director Qualifications.  In concluding that each of the foregoing Directors should serve as a Director, the Nominating and Corporate Governance Committee and the Board focused on each Director’s participation and performance on the Board during his or her tenure, as well as each Director’s experience, qualifications, attributes and skills discussed in each of the Directors’ individual biographies set forth elsewhere herein.  In particular, with respect to each Director, the Nominating and Corporate Governance Committee and the Board noted the following:

·

Mr. Catalano’s experience in running a firm engaged in the brokerage, management, rehabilitation and leasing of commercial property coincides closely with our business;

·

Mr. Beard’s experience in engineering and construction services, as well as his expertise in corporate acquisition and finance, enable him to provide insight relating to our joint venture, development and other activities;

·

Mr. Gauvreau’s financial experience, including his serving as the chief financial officer of a NYSE-listed company and on the audit committee of a NASDAQ-listed company, qualifies him to serve as chairman of our Audit Committee;

·

Mr. Gorski’s experience as a lawyer and focus on local government law not only gives the Board a valuable perspective on the numerous legal issues (including land use law) that we face, but also on local political issues;

·

Mr. Imperiale’s experience in the brokerage and investment advisory industries allow him to provide useful oversight and advice as we look to refinance debt and strengthen our balance sheet, as well as to address issues with respect to our securities portfolio;

·

Mr. Masick’s experience as a certified public accountant and experience in providing audit, tax and consulting services to privately-owned businesses provides financial expertise to the Board and the Audit Committee;

·

Ms. Murphy’s public service and experience in operating her own business bring a different perspective to evaluating our relationships with public officials, tenants and customers of our tenants; and

·

Ms. Gujral’s experience in the real estate industry and the securities brokerage business provides guidance to us as well as assistance in maintaining our relationship not only with the brokers and advisors who have sold our stock, but also with the investors who purchased our stock.

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Board Structure.  Although our Bylaws permit us to have the same person serve as Chief Executive Officer and Chairman of the Board, since inception, we have had separate individuals serving in these two positions.  The Board believes this structure best serves us by allowing one person (Chief Executive Officer) to focus his efforts on setting our strategic direction and providing day-to-day leadership while the other person (Chairman of the Board) can focus on presiding at meetings of the Board and overall planning and relations with the Directors.  The Board believes that the needs of a corporation with the large number of properties and the wide spectrum of issues that we face are best met by allowing these two different functions to be handled by two separate individuals.

Board Role in Risk Management.  General oversight of risk management is a function undertaken by the entire Board.  All major leases, purchases and sales of property, and financing are reviewed and approved by the Board.  As part of this review and approval process, the Board considers, among other things, the risks posed by such activities and receives input on various aspects of those risks, including operational, financial, legal and regulatory, and reputational risk, from senior management, including the Chief Financial Officer, Chief Accounting Officer and the General Counsel.  In addition, the Audit Committee regularly receives reports from the Chief Financial Officer and Chief Accounting Officer, as well as from our independent auditors and other outside professionals, with respect to financial and operational controls and risk assessment, and reports on these matters to the Board.

Compensation Policy and Risk.  The Compensation Committee has reviewed our compensation policies and practices and does not believe such policies and practices have a material adverse effect on our risk profile.

Corporate Governance Documents

On October 12, 2004, our Board unanimously adopted the following corporate governance documents:

·

Code of Business Conduct and Ethics,

·

Nonretaliation Policy; and

·

Complaint Procedures for Accounting and Auditing Matters.

Subsequently, on May 13, 2008, our Board of Directors unanimously adopted the following:

·

Guidelines on Corporate Governance

·

Board of Directors Member Job Description

The Code of Business Conduct and Ethics is applicable to all of our employees, including the Chief Executive Officer and Chief Financial Officer, and to our Board of Directors.  The Code of Business Conduct and Ethics is publicly available on our website at www.inland-western.com.  We intend to disclose on this website any amendments to, or waiver of, any provision of the Code of Business Conduct and Ethics applicable to our directors and executive officers that would otherwise be required under the rules of the Securities and Exchange Commission, or SEC, or any stock exchange on which our shares of common stock may be listed.

Corporate Governance Profile

We have structured our corporate governance in a manner we believe closely aligns our interests with those of our shareholders. Notable features of our corporate governance structure include the following:

·

our board of directors is not staggered, with each of our directors subject to re-election annually;

·

of the eight persons who currently serve on our board of directors, seven have been affirmatively determined by our board of directors to be independent for purposes of the NYSE’s listing standards and Rule 10A-3 under the Exchange Act;

·

at least one of our directors qualifies as an “audit committee financial expert” as defined by the SEC;

·

we have an independent Chairman of our board of directors, and

·

we do not have a shareholder rights plan.

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Board Meetings in 2010

Our Board met 14 times during 2010. Each director who was a director during 2010 attended more than 90% of the total number of meetings of the Board and each Committee on which he or she served. We do not have a policy with regard to Board members’ attendance at annual shareholder meetings. However, each director who was a director at such time attended the 2010 Annual Meeting.

Board Committees

Our board of directors has established three standing committees: the Audit Committee, the Executive Compensation Committee and the Nominating and Corporate Governance Committee.  All members of the committees described below are independent as such term is defined in the NYSE’s listing standards and as affirmatively determined by our board of directors, other than Ms. Gujral.

Board Committee		Chairman	Members
Audit Committee		Paul R. Gauvreau	Kenneth H. Beard Kenneth E. Masick
Executive Compensation Committee		Frank A. Catalano, Jr.	Richard P. Imperiale Brenda G. Gujral Barbara A. Murphy
Nominating and Corporate Governance Committee(1)		Richard P. Imperiale	Gerald M. Gorski Kenneth E. Masick
(1)	Robert D. Parks served as a member of our Nominating and Corporate Governance Committee and Board of Directors until our annual meeting of shareholders on October 12, 2010.  Mr. Parks was not independent as such term is defined in the NYSE’s listing standards.

Audit Committee

Our Board has established an Audit Committee comprised of Messrs. Beard, Gauvreau, and Masick.  Mr. Gauvreau serves as the Chair of the Audit Committee and qualifies as our “financial expert” under the SEC rules. The Audit Committee operates under a written charter approved by the Board of Directors.

The Audit Committee is responsible for the engagement of our independent registered public accounting firm, reviewing the plans and results of the audit engagement with our independent registered public accounting firm, approving services performed by, and the independence of, our independent registered public accounting firm, considering the range of audit and non-audit fees, and consulting with our independent registered public accounting firm regarding the adequacy of our internal accounting controls.

Executive Compensation Committee

Our Board has established an Executive Compensation Committee comprised of Mr. Catalano, Mr. Imperiale, Ms. Gujral and Ms. Murphy.  Mr. Catalano serves as the chair of the Executive Compensation Committee.  Each of the members of the Executive Compensation Committee satisfies the definition of “independent” under the NYSE’s listing standards, other than Ms. Gujral. The Executive Compensation Committee operates under a written charter approved by the Board of Directors.

The Executive Compensation Committee makes recommendations to our Board concerning compensation policies and programs, including salaries and incentive compensation, for our executive officers, and administers our employee benefit plans. The Executive Compensation Committee has not delegated its authority to others. It is likely that our chief executive officer will provide input into executive compensation decisions. We did not hire a compensation consultant to assist the Executive Compensation Committee in determining compensation for 2010.

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Nominating and Corporate Governance Committee

Our Board has established a Nominating and Corporate Governance Committee, or Nominating Committee  comprised of Messrs. Gorski, Imperiale and Masick.  Mr. Imperiale serves as the chair of the Nominating Committee.  Each of the Members of the Nominating Committee satisfies the definition of “independent” under the NYSE’s listing standards. The Nominating Committee operates under a written charter approved by the Board of Directors.

The Nominating Committee identifies possible director nominees (whether through a recommendation from a shareholder or otherwise), and makes initial determinations as to whether to conduct a full evaluation of the candidate(s). This initial determination is based on the information provided to the Nominating Committee when the candidate is recommended, the Nominating Committee’s own knowledge of the prospective candidate and information, if any, obtained by the Nominating Committee’s inquiries. The preliminary determination is based primarily on the need for additional Board members to fill vacancies, expand the size of the Board of Directors or obtain representation in market areas without Board representation and the likelihood that the candidate can satisfy the evaluation factors described below. If the members of the Nominating Committee determine that additional consideration is warranted, the Nominating Committee m ay gather additional information about the candidate’s background and experience. The members of the Nominating Committee then evaluate the prospective nominee against the following standards and qualifications:

·

achievement, experience and independence;

·

wisdom, integrity and judgment;  

·

understanding of the business environment; and  

·

willingness to devote adequate time to Board duties.

The members of the Nominating Committee also consider such other relevant factors as they deem appropriate, including the current composition of the Board, the need for audit committee or other expertise and the evaluations of other candidates. In connection with this evaluation, the members of the Nominating Committee determine whether to interview the candidate. If the members of the Nominating Committee decide that an interview is warranted, one or more of those members, and others as appropriate, interview the candidate in person or by telephone. After completing this evaluation and interview, the full Board would nominate such candidates for election.

Shareholder Communications

We have not adopted a formal process for shareholder communications with our Board.  Every effort has been made to ensure that the views of shareholders are heard by our Board or individual directors, as applicable, and that appropriate responses are provided to shareholders in a timely manner.  Shareholders are free to contact any director or executive officer directly by writing in care of us, or by writing to Mr. Dennis K. Holland, our General Counsel and Secretary, at 2901 Butterfield Road, Oak Brook, IL 60523, or by sending an email to Mr. Holland at holland@inland-western.com.  Shareholders can contact the Audit Committee directly by sending a letter to Mr. Paul Gauvreau, in care of us at 2901 Butterfield Road, Oak Brook, IL 60523.

All communications received as set forth in the preceding paragraph will be opened by the office of the General Counsel for the sole purpose of determining the nature of the communications. Communications that constitute advertising, promotions of a product or service, or patently offensive material will not be forwarded to the directors. Other communications will be forwarded promptly to the addressee or addressees as deemed appropriate.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of our outstanding shares, to file statements of beneficial ownership and changes in beneficial ownership of our shares with the SEC and to furnish us with copies of all statements they file.  Based solely on a review of the forms we have received and on written representations from certain reporting persons that no such forms were required for them, we believe that during 2010 all Section 16 filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with by such persons, except that one Form 4 filed on behalf of Steven P. Grimes relating to one transaction was filed later than the two-day deadline, one Form 4 filed on behalf of Dennis K. Holland relating to one transaction was filed later than the two-day deadline, one Form 4 filed on behalf of Brenda R. Gujral relating to one

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transaction was filed later than the two-day deadline and one Form 4 filed on behalf of Barbara A. Murphy relating to one transaction was filed later than the two-day deadline.  

Item 11.  Executive Compensation

Compensation Discussion and Analysis

The following discussion and analysis is set forth with respect to the compensation and benefits for the Company’s Chief Executive Officer and Chief Financial Officer and the other three officers included in the “Summary Executive Compensation Table” included herein (together, the Company’s “Named Executive Officers”) for the Company’s fiscal year ended December 31, 2010 (“fiscal 2010”).

Compensation Committee Members, Independence and Responsibility

The compensation and benefits payable to the Named Executive Officers are established by the Board with the assistance of the Executive Compensation Committee of the Board (the “Committee”).  The Committee is currently comprised of Frank A. Catalano, Jr. (Chairman), Brenda G. Gujral, Richard P. Imperiale, and Barbara A. Murphy.  Each of Messrs. Catalano and Imperiale and Ms. Murphy (but not Ms. Gujral) is (i) an “independent” director within the meaning of the NYSE’s listing standards, (ii) a “non-employee director” within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended, and (iii) an “outside director” within the meaning of the regulations promulgated pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code.

· The Committee operates under a written charter adopted by the Board.  Pursuant to its charter, the Committee is charged with reviewing and approving the Company’s compensation philosophy and is responsible for assuring that the officers and key management personnel of the Company and its subsidiaries are effectively compensated in terms that are motivating, internally equitable and externally competitive.  Pursuant to its charter, the Committee’s function is to:

- review (in consultation with management or the Board), recommend to the Board for approval and evaluate the compensation plans, policies and programs of the Company, especially those regarding executive compensation;

- determine the compensation of the chief executive officer and all other executive officers of the Company; and

- produce an annual report on executive compensation for inclusion in the Company’s proxy materials in accordance with applicable rules and regulations.

Objectives and Structure of Our Compensation Program

The primary objectives of our executive compensation programs are:  (i) to attract, retain and reward experienced, highly-motivated executives who are capable of leading us effectively and contributing to our long-term growth and profitability, (ii) to motivate and direct the performance of management with clearly-defined goals and measures of achievement, and (iii) to align the interests of management with the interests of our shareholders.

We attempt to achieve our objectives through offering the opportunity to earn a combination of cash and equity-based compensation to provide appropriate incentives for our executives.  Executive officers are eligible to receive a combination of (i) annual base salary, (ii) annual cash or equity incentive compensation, and (iii) option grants under our Stock Incentive Plan.  Each of the Named Executive Officers participates in the same benefits programs available to all of our employees:  health and dental insurance; group term life insurance; short-term disability coverage; and tax-qualified 401(k) plan.  The Company does not provide additional perquisites to the Named Executive Officers.  The Committee did not engage a compensation consultant for 2010.

When we were initially formed in 2003, we did not have any employees. Instead, we had agreements with related parties who provided all of our services and employees in exchange for fees. At that time, those related parties compensated their employees, including each of the Named Executive Officers, from the time they started their employment with such related parties.  We were not a part of any compensation decisions or arrangements. On November 15, 2007, we acquired

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those related parties and hired substantially all of those employees who were employed by those related parties and provided services to us in a transaction referred to as the internalization. As part of the internalization, we entered into employment agreements with four of our executive officers, including Steven P. Grimes, our current Chief Executive Officer, President, Chief Financial Officer and Treasurer; Shane C. Garrison, our Chief Investment Officer and Niall J. Byrne, our Vice President and President of our property management companies.  The term of our initial employment agreements with each of the individuals listed above began on November 15, 2007, the closing date of the internalization.  The employment agreements provided that each Named Executive Officer was to receive a salary, but made no provision for an incentive compensation or equity compensation.  

In late 2007, our Board established the Committee. In February 2008, the Board adopted a charter for the Committee and it began meeting to examine and establish compensation programs for our chief executive officer and other executive officers.

In August 2008, the Company finalized new employment agreements for all of the Named Executive Officers for the year ended on December 31, 2008 (except for Mr. Holland’s employment agreement which continued until December 31, 2009) retroactive to January 1, 2008.  The Committee determined not to enter into any new employment agreements with the Named Executive Officers for 2009 and 2010.

As a part of its efforts, the Committee set the objectives of our compensation program.  While the Committee informally compared compensation against peer group data to gain a sense of current market compensation, no benchmarking was used.  The peer group selected by the Committee consists of the following nine publicly-traded REITs with a substantial retail shopping center portfolio:

Developers Diversified Realty Corporation Regency Centers Corporation Cedar Shopping Centers, Inc. Equity One, Inc. Federal Realty Investment Trust Inland Real Estate Corporation Kimco Realty Corporation Ramco-Gershenson Properties Trust Weingarten Realty Investments

2010 Executive Compensation

In fiscal 2010, the Committee considered a combination of base salary, incentive compensation, annual long-term equity awards in the form of stock options and other benefits noted above to meet its compensation objectives.  The proportions of these elements were determined by the Committee in its discretion, considering, among other things, the prevailing practices in the marketplace, including the peer group, and the historical compensation by the Company and the prior employers of the Company’s Named Executive Officers.  In establishing base salaries for 2010, the Committee considered present compensation, market competitiveness in relation to the Company’s performance and capital structure, the roles, responsibilities and performance of each of the Named Executive Officers, the contribution of each of the Named Executive Officers to the Company’s business, an analysis of job requirements, and the prior exp erience and accomplishments of each of the Named Executive Officers.  The decision as to whether to award incentive compensation, for 2010 was solely in the discretion of the Committee.  The Committee believes that having incentive compensation within the control of the Committee allows the Company more directly to reward achievement and effort by the Named Executive Officers without using formulas which may or may not appropriately reward individual Named Executive Officers.  Discretionary incentive compensation also assists in the Company’s efforts to retain outstanding executive officers.  Finally, the Committee views the granting of stock options as a means of aligning management and shareholder interests, providing incentives and rewarding management’s long-term perspective, and retaining the services of the Named Executive Officers.  

In determining whether to pay the annual incentive compensation for each Named Executive officer for fiscal 2010, the Committee generally considered a number of factors on a subjective basis, including, but not limited to, (i) the scope of the officer’s responsibilities within the Company; (ii) the experience of the officer within our industry and at the Company; (iii) performance of the Named Executive Officer and his or her contribution to the Company; (iv) the Company’s financial budget and general wage level throughout the Company for fiscal 2010; (v) a review of historical compensation information for the individual officer; (vi) a subjective determination of the compensation needed to

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motivate and retain that individual; (vii) the recommendations of the Chief Executive Officer (and the recommendation of the Chairman of the Board with respect to the Chief Executive Officer); (viii) data regarding compensation paid to officers with comparable titles, positions or responsibilities at REITs that are approximately similar in size to the Company, and (ix) general industry and market conditions and their impact upon the ability of the Company to achieve objective performance goals and the time commitment required of the Named Executive Officers.  An officer’s target compensation is not mechanically set to be a particular percentage of the peer group average, although as noted the Committee does review the officer’s compensation relative to the peer group to help the Committee perform the subjective analysis described above.  Peer group data is not used as the determining factor in setting compensation for the following reasons:  (a) the average actual compensation for comparable officers at the peer companies may be the result of a year of over performance or under performance by the peer group (i.e., historically, the Company has not had access to the target compensation set for the peer group, but only to the actual compensation paid, so setting target compensation strictly by reference to actual compensation data for peers would be inappropriate); and (b) the Committee believes that ultimately the decision as to appropriate target compensation for a particular office should be made based on the full review described above.  The Committee also reviews competitive market compensation data for the peer group.  

Steven P. Grimes. For 2010, Mr. Grimes, our Chief Executive Officer, President, Chief Financial Officer and Treasurer, received a base salary of $450,000.  On October 12, 2010, the Board increased the annual base salary for Mr. Grimes to $525,000, effective January 1, 2011.

Dennis K. Holland. For 2010, Mr. Holland, our General Counsel and Secretary, received a base salary of $265,000.  On October 12, 2010, the Board increased the annual base salary for Mr. Holland to $325,000, effective January 1, 2011.

Shane C. Garrison.  For 2010, Mr. Garrison, our Chief Investment Officer, received a base salary of $250,000.  On October 12, 2010, the Board increased the annual base salary for Mr. Garrison to $350,000, effective January 1, 2011.

Niall J. Byrne. For 2010, Mr. Byrne, our President of Property Management, received a base salary of $250,000.  On October 12, 2010, the Board increased the annual base salary for Mr. Byrne to $275,000, effective January 1, 2011.

On October 12, 2010, we increased the annual base salaries for the Named Executive Officers, effective January 1, 2011.  Among other reasons, the Board made these adjustments as none of the management team, other than Mr. Grimes, has had an increase in base salary during the period from January 1, 2008 through January 1, 2011, the effective date of such adjustments, while undertaking increased workloads due to the economic recession and the reallocation of duties of the Company’s previous President and Chief Executive Officer, who left in 2009.  In addition, the Board made these adjustments at this time, in view of the fact that the adjustments to the management team’s base salaries aggregated $260,000, which is less than the $375,000 in executive compensation savings achieved by the combining of the role of the Chief Financial Officer with the Chief Executive Officer.  We also amended the bonus arrangement f or the management team, among others, to provide that bonuses, if any, will be made in shares of common stock of the Company rather than cash, if certain goals are achieved.

For 2010, the Committee approved an executive bonus program pursuant to which Messrs. Grimes, Holland, Garrison and Byrne are each eligible to receive a bonus payable in shares of restricted common stock with a value of $225,000, $66,250, $62,500 and $62,500, respectively.  The number of shares of restricted stock that will be awarded to each Executive Officer will be calculated by dividing the value of the bonus earned by the Named Executive Officer by the fair value of our common stock as determined by the Board of Directors or the Committee on the date the Committee determines whether the corporate performance measures for the bonuses have been achieved. Each of Messrs. Grimes and Holland will earn 50% of their bonus if two corporate performance measures, a target occupancy rate of 90% for 2010 and target amount of cash flows from operations of $200,000,000 for the year ended December 31, 2010, are achieved.  Messrs. Gri mes and Holland are eligible to receive the remaining 50% of their bonuses based upon individual performance as determined by the Committee in its discretion.  Mr. Garrison will earn 80% of his bonus if the target occupancy rate for 2010 is achieved.  Mr. Byrne will earn 80% of his bonus if the target amount of cash flows from operations for the year ended December 31, 2010 is achieved.  Messrs. Garrison and Byrne are eligible to receive the remaining 20% of their bonuses based upon individual performance as determined by the Committee in its discretion. Under the executive bonus program, 50% of any restricted stock grants to the executives will fully vest on each of the third and fifth anniversaries of the date that the Committee determines whether the corporate performance measures for the bonuses have been achieved.

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2010 Executive Compensation Table

The following table sets forth information with respect to all compensation paid or earned for services rendered to us by the Named Executive Officers for the years ended December 31, 2010, 2009 and 2008.

Name and			Salary	Bonus	Stock Awards		All Other Compensation (1)		Total
Principal Position		Year	($)	($)	($)		($)		($)
Steven P. Grimes		2010	450,000	-	-	(2)		-	450,000
Chief Executive Officer, President,		2009	375,000	-	-			2,000	377,000
Chief Financial Officer and Treasurer		2008	375,000	93,750	-			1,000	469,750
Shane C. Garrison		2010	250,000	-	-	(2)		-	250,000
Executive Vice President		2009	250,000	-	-			2,000	252,000
Chief Investment Officer		2008	250,000	46,126	-			1,232	297,358
Niall J. Byrne		2010	250,000	-	-	(2)		-	250,000
Executive Vice President		2009	250,000	-	-			2,000	252,000
and President of  Property Management		2008	250,000	31,250	-			1,825	283,075
Dennis K. Holland		2010	265,000	-	-	(2)		-	265,000
Executive Vice President		2009	265,000	26,500	-			2,000	293,500
General Counsel and Secretary		2008	265,000	26,500	-			1,797	293,297
(1)	Represents company match to 401(k) plan.
(2)	The amounts reported are based on the probable outcome of the applicable corporate performance measures as of the service inception date for accounting purposes.  Assuming the applicable corporate performance measures were achieved for these restricted stock bonuses, the fair value of the portion of the restricted stock bonuses that is based on achieving the applicable corporate performance measures would have been as follows for each of the Named Executive Officers: Mr. Grimes - $112,500; Mr. Garrison - $50,000; Mr. Byrne - $50,000; and Mr. Holland - $33,125.

Grants of Plan-Based Awards

We have provided the following Grants of Plan-Based Awards table to provide additional information about restricted stock bonuses program for our Named Executive Officers during the year ended December 31, 2010.

		Estimated Possible Payouts Under Equity Incentive Plan Awards
Name	Grant Date (1)	Target ($) (2) (3) (4)	Grant Date Fair Value of Stock Awards ($) (5)
Steven P. Grimes	May 11, 2010	112,500	-
Shane C. Garrison	May 11, 2010	50,000	-
Niall J. Byrne	May 11, 2010	50,000	-
Dennis K. Holland	May 11, 2010	33,125	-

(1)

For the purposes of this table, the date reported represents the service inception date for accounting purposes.

(2)

The number of shares of restricted stock that will be awarded will be calculated by dividing the value of the bonus earned by the fair value of our common stock as determined by the Board of Directors or the Committee on the date the Committee determines whether the corporate performance measures for the bonuses have been achieved.

(3)

Represents the portion of the potential restricted stock bonuses that is based on achieving the applicable corporate performance measures.

(4)

The corporate performance measures are specific targets and do not provide for threshold or maximum amounts.  Accordingly, no threshold or maximum columns have been included in the table.

(5)

The amounts reported are based on the probable outcome of the applicable corporate performance measures as of the service inception date for accounting purposes.

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Outstanding Equity Awards at Fiscal Year-End

We have provided the following Outstanding Equity Awards at Fiscal Year-End table to provide additional information about restricted stock bonuses program for our Named Executive Officers during the year ended December 31, 2010.

		Stock Awards
Name		Number of Shares or Units of Stock That Have Not Vested (#)(1)	Market Value of Shares or Units of Stock That Have Not Vested ($)(1)
Steven P. Grimes		-	-
Shane C. Garrison		7,300	50,000
Niall J. Byrne		-	-
Dennis K. Holland		-	-
(1)	Represents the portion of the potential restricted stock bonuses that is based on achieving the applicable corporate performance measures.  The Committee has not made a determination whether the corporate performance measures for the bonuses have been achieved.  The foregoing represents our estimate of the amount of bonus and number of shares earned by each executive.

Employment Agreements

The Committee determined not to enter into any new employment agreements with the Named Executive Officers for 2010.

Director Compensation

Cash Compensation

From January 1, 2008 to December 31, 2010, each director (other than Ms. Gujral, who is not entitled to receive any compensation from the Company for her service on the Board of Directors or any of its committees) receives an annual director fee of $40,000.  This amount will increase to $50,000 beginning January 1, 2011.  The independent chairman of the Board of Directors receives an additional annual fee of $25,000, the chairman of the Audit Committee receives an additional annual fee of $10,000, and the chairmen of the Executive Compensation Committee and the Nominating and Corporate Governance Committee receive an additional annual fee of $5,000. In addition, each director receives $1,000 for attending in person or $750 for attending via telephone, each meeting of the Board, and $500 for attending, whether in person or via telephone, each committee meeting.  Members of a special committee formed to evaluate two transactions with a related party received $1,000 for attending each meeting, whether in person or via telephone, of the special committee.

Equity Compensation

Each non-employee director is entitled to be granted an option under our Independent Director Stock Option Plan to acquire 5,000 shares as of the date he or she initially becomes a director. In addition, each non-employee director is entitled to be granted an option to acquire 5,000 shares on the date of each annual shareholders’ meeting, so long as the director remains a member of the Board on such date. All such options are granted at the fair market value of a share on the last business day preceding the date of each annual shareholders’ meeting and become fully exercisable on the second anniversary of the date of grant.

Options granted under the Independent Director Stock Option Plan are exercisable until the first to occur of:

·

the tenth anniversary of the date of grant,

·

the removal for cause of the director as a director, or

·

three months following the date the director ceases to be a director for any other reason except death or disability.

The options may be exercised by payment of cash or through the delivery of our common stock. They are generally exercisable in the case of death or disability for a period of one year after death or the disabling event, provided that the death or disabling event occurs while the person is a director. However, if the option is exercised within the first six

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months after it becomes exercisable, any shares issued pursuant to such exercise may not be sold until the six month anniversary of the date of the grant of the option. Notwithstanding any other provisions of the Independent Director Stock Option Plan to the contrary, no option issued pursuant thereto may be exercised if such exercise would jeopardize our status as a REIT under the Code.

2010 Director Compensation Table

The following table sets forth a summary of the compensation we paid to our directors during 2010:

Name	Fees Earned or Paid in Cash ($)	Option Awards ($)(2)(3)	Total ($)
Paul R. Gauvreau	71,000	6,902	77,902
Gerald M. Gorski	70,250	6,902	77,152
Frank A. Catalano, Jr.	62,500	6,902	69,402
Barbara A. Murphy	61,250	6,902	68,152
Kenneth H. Beard	60,750	6,902	67,652
Richard P. Imperiale	58,500	6,902	65,402
Kenneth E. Masick	57,750	6,902	64,652
Robert D. Parks (1)	-	-	-
Brenda G. Gujral (1)	-	-	-

(1)

Mr. Parks and Ms. Gujral do not receive any fees or other remuneration for serving as our directors.

(2)

As of December 31, 2010, each of the directors other than Mses. Gujral and Murphy and Mr. Parks held unexercised options to purchase 10,000 shares of common stock.  As of December 31, 2010, Ms. Murphy held unexercised options to purchase 8,500 shares of common stock and Ms. Gujral and Mr. Parks held no unexercised options.

(3)

The option awards were valued using the Black-Scholes option pricing model and the following assumptions: expected term of options – 5 years, expected volatility – 35%, expected dividend yield – 1.87% and risk-free interest rate – 1.13%.

Executive Compensation Committee

The Executive Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Executive Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

Submitted by the Executive Compensation Committee

Frank A. Catalano, Jr. (Chairman)

Brenda G. Gujral

Richard P. Imperiale

Barbara A. Murphy

Compensation Committee Interlocks and Insider Participation

During 2010, the members of the Executive Compensation Committee consisted of Frank A. Catalano, Jr. (chair), Brenda G. Gujral, Richard P. Imperiale and Barbara A. Murphy.  Brenda G. Gujral served as our Chief Executive Officer until November 15, 2007.  Additionally, we are required to disclose certain relationships and related transactions with Ms. Gujral.  See Item 13 “Certain Relationships and Related Transactions.”  None of the other members of the Executive Compensation Committee has any relationship with us requiring disclosure under applicable rules and regulations of the SEC.  No other member of our Executive Compensation Committee is a current or former officer or employee of ours or any of our subsidiaries. None of our named executive officers serves as a member of the board of directors or compensation committee of any company that has one or more of its executive officers serving a s a member of our board of directors or Executive Compensation Committee.

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Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters  

Security Ownership Of Certain Beneficial Owners And Management

The following table sets forth information as of December 31, 2010, regarding the number and percentage of shares beneficially owned by: (i) each director and nominee; (ii) each named executive officer; (iii) all directors and executive officers as a group; and (iv) any person known to us to be the beneficial owner of more than 5% of our outstanding shares.  As of December 31, 2010, we had over 111,000 shareholders of record and 477,345,478 shares of common stock outstanding.

Name and Address of Beneficial Owner (1)	Number of Shares (2)	Percent Before Offering
Directors and Named Executive Officers
Brenda G. Gujral	97,673	*
Kenneth H. Beard (3)	75,305	*
Frank A. Catalano, Jr. (3)	13,602	*
Paul R. Gauvreau (3)	121,732	*
Gerald M. Gorski (3)	12,718	*
Richard P. Imperiale (3)	10,000	*
Kenneth E. Masick (3)	10,000	*
Barbara A. Murphy (4)	10,000	*
Steven P. Grimes	29,104	*
Shane C. Garrison	-	*
Niall J. Byrne	-	*
James W. Kleifges	-
Dennis K. Holland	4,718	*
All directors and executive officers as a group (13 persons)	384,852	*
Daniel L. Goodwin (5)	24,099,759	5.05%
* Less than 1%

(1)	The address of each of the persons listed above is 2901 Butterfield Road, Oak Brook, IL  60523.
(2)	Beneficial ownership includes outstanding shares and shares which are not outstanding that any person has the right to acquire within 60 days after the date of this table.  However, any such shares which are not outstanding are not deemed to be outstanding for the purpose of computing the percentage of outstanding shares beneficially owned by any other person.  Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investing power with respect to all shares beneficially owned by them.
(3)	Includes 10,000 shares issuable upon exercise of options granted under our independent director stock option plan, to the extent that such options are currently exercisable or will become exercisable within 60 days after the date of this table.
(4)	Includes 8,500 shares issuable upon exercise of options granted under our independent director stock option plan, to the extent that such options are currently exercisable or will become exercisable within 60 days after the date of this table.
(5)	Includes 128,182 shares held jointly by Mr. Goodwin and his spouse.  Also includes 5,812,500, 8,510,493, 215,531, 71,438 and 2,880 shares of common stock owned by Inland Corporate Holdings Corporation, Inland Funding Corporation, IREIC, Partnership Ownership Corporation and Inland Condo Investor Loan Corporation, respectively.

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Item 13.   Certain Relationships and Related Transactions, and Director Independence

All dollar amounts and shares in this Item 13 are stated in thousands.

Effects of Transactions with Related and Certain Other Parties

The Inland Group, Inc., or the Inland Group, and its affiliates are related parties because of our relationships with Daniel L. Goodwin, Robert D. Parks and Brenda G. Gujral, each of whom are significant shareholders and/or principals of the Inland Group or hold directorships and are executive officers of affiliates of the Inland Group.  Specifically, Mr. Goodwin is the Chairman, chief executive officer and a significant shareholder of the Inland Group.  Mr. Parks is a principal and significant shareholder of the Inland Group.  Messrs. Goodwin and Parks and Ms. Gujral hold a variety of positions as directors and executive officers of Inland Group affiliates.  With respect to our company, Mr. Goodwin is a beneficial owner of more than 5% of our common stock, Mr. Parks was a director and Chairman of our board of directors until October 12, 2010 and Ms. Gujral is currently one of our directors and has held this dir ectorship since 2003. Therefore, due to these relationships, transactions involving the Inland Group and /or its affiliates are set forth below.

Ongoing Services Agreements

The following provides a summary of a number of ongoing agreements that we have with Inland Group affiliates that we are actively using:

An Inland Group affiliate, which is a registered investment advisor, provides investment advisory services to us related to our securities investment account for a fee (paid monthly) of up to one percent per annum based upon the aggregate fair value of our assets invested.  Subject to our approval and the investment guidelines we provide to them, the Inland Group affiliate has discretionary authority with respect to the investment and reinvestment and sale (including by tender) of all securities held in that account.  The Inland Group affiliate has also been granted power to vote all investments held in the account.  We incurred fees totaling $272, $67 and $1,390 for the years ended December 31, 2010, 2009 and 2008, respectively.  As of December 31, 2010, 2009 and 2008, fees of $22, $20 and $160 remained unpaid, respectively.  The agreement is cancellable by providing not less than 30 days prior written not ice and specification of the effective date of said termination.  Effective for the period from November 1, 2008 through September 30, 2009, the investment advisor agreed to waive all fees due at our request.  Fees were incurred again beginning on October 1, 2009.

An Inland Group affiliate provides loan servicing for us for a monthly fee based upon the number of loans being serviced.  Such fees totaled $282, $372 and $405 for the years ended December 31, 2010, 2009 and 2008, respectively.  As of December 31, 2010, 2009 and 2008, no amounts remained unpaid.  The agreement is non-exclusive as to both parties and is cancellable by providing not less than 180 days prior written notice and specification of the effective date of said termination.

An Inland Group affiliate has a legal services agreement with us, where that Inland Group affiliate will provide us with certain legal services in connection with our real estate business.  We will pay the Inland Group affiliate for legal services rendered under the agreement on the basis of actual time billed by attorneys and paralegals at the Inland Group affiliate’s hourly billing rate then in effect.  The billing rate is subject to change on an annual basis, provided, however, that the billing rates charged by the Inland Group affiliate will not be greater than the billing rates charged to any other client and will not be greater than 90% of the billing rate of attorneys of similar experience and position employed by nationally recognized law firms located in Chicago, Illinois performing similar services.  For the years ended December 31, 2010, 2009 and 2008, we incurred $343, $551 and $500, respectively, of these costs.  Legal services costs totaling $100, $123 and $189 remained unpaid as of December 31, 2010, 2009 and 2008, respectively.  The agreement is non-exclusive as to both parties and is cancellable by providing not less than 180 days prior written notice and specification of the effective date of said termination.

We have service agreements with certain Inland Group affiliates, including office and facilities management services, insurance and risk management services, computer services, personnel services, property tax services and communications services.  Some of these agreements provide that we obtain certain services from the Inland Group affiliates through the reimbursement of a portion of their general and administrative costs.  For the years ended December 31, 2010, 2009 and 2008, we incurred $2,637, $3,027 and $2,814, respectively, of these reimbursements.  Of these costs,

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$248, $194 and $209 remained unpaid as of December 31, 2010, 2009 and 2008, respectively.  The services are to be provided on a non-exclusive basis in that we shall be permitted to employ other parties to perform any one or more of the services and that the applicable counterparty shall be permitted to perform any one or more of the services to other parties.  The agreements have various expiration dates, but are cancellable by providing not less than 180 days prior written notice and specification of the effective date of said termination.

Office Sublease

We sublease our office space from an Inland Group affiliate.  The lease calls for annual base rent of $496 and additional rent in any calendar year of our proportionate share of taxes and common area maintenance costs.  Additionally, the Inland Group affiliate paid certain tenant improvements under the lease in the amount of $395 and such improvements are being repaid by us over a period of five years.  The sublease calls for an initial term of five years which expires in November 2012, with one option to extend for an additional five years.  Of these costs, $155, $175 and none remained unpaid as of December 31, 2010, 2009 and 2008, respectively.

Elective Services Agreements

The following provides a summary of a number of agreements that we have with Inland Group affiliates that we are not actively using and do not expect to use:

An Inland Group affiliate facilitates the mortgage financing we obtain on some of our properties.  We pay the Inland Group affiliate 0.2% of the principal amount of each loan obtained on our behalf.  Such costs are capitalized as loan fees and amortized over the respective loan term as a component of interest expense.  For the years ended December 31, 2010, 2009 and 2008, we had incurred $88, none and $1,330, respectively, of loan fees to this Inland Group affiliate.  As of December 31, 2010, 2009 and 2008, no amounts remained unpaid.  The agreement is non-exclusive as to both parties and is cancellable by providing not less than 180 days prior written notice and specification of the effective date of said termination.

We have a transition property due diligence services agreement with an Inland Group affiliate.  In connection with our acquisition of new properties, the Inland Group affiliate will give us a first right as to all retail, mixed use and single-user properties and, if requested, provide various services including services to negotiate property acquisition transactions on our behalf and prepare suitability, due diligence, and preliminary and final pro forma analyses of properties proposed to be acquired.  We will pay all reasonable third-party out-of-pocket costs incurred by this entity in providing such services; pay an overhead cost reimbursement of $12 per transaction, and, to the extent these services are requested, pay a cost of $7 for due diligence expenses and a cost of $25 for negotiation expenses per transaction.  We incurred no such costs for the years ended December 31, 2010 and 2009 and $19 of such costs for the year ended December 31, 2008.  None of these costs remained unpaid as of December 31, 2010, 2009 and 2008.  The agreement is cancellable by providing not less than 60 days prior written notice and specification of the effective date of said termination.

We have an institutional investor relationships services agreement with an Inland Group affiliate.  Under the terms of the agreement, the Inland Group affiliate will attempt to secure institutional investor commitments in exchange for advisory and client fees and reimbursement of project expenses.  We incurred $18, $34 and $10 during the years ended December 31, 2010, 2009 and 2008, respectively.  None of these costs remained unpaid as of December 31, 2010, 2009 and 2008.  The agreement is non-exclusive as to both parties and is cancellable by providing not less than 180 days prior written notice and specification of the effective date of said termination.

Joint Ventures with Inland Equity

On November 29, 2009, we formed IW JV 2009, LLC, or IW JV, a wholly-owned subsidiary, and transferred a portfolio of 55 investment properties and the entities which owned them into it.  Subsequently, in connection with a $625,000 debt refinancing transaction, which consisted of $500,000 of mortgages payable and $125,000 of notes payable, on December 1, 2009, we raised additional capital of $50,000 from a related party, Inland Equity Investors, LLC (“Inland Equity”) in exchange for a 23% noncontrolling interest in IW JV. IW JV, which is controlled by us and, therefore, consolidated, has an aggregate of approximately $1 billion in total assets and will continue to be managed and operated by us. Inland Equity is an LLC owned by certain individuals, including Daniel L. Goodwin, who beneficially owns more than 5% of our

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common stock, and Robert D. Parks, who was the Chairman of our Board until October 12, 2010 and who is Chairman of the Board of certain affiliates of the Inland Group. The Independent Committee reviewed and recommended approval of this transaction to our board of directors.

The organizational documents of IW JV contain provisions that require the entity to be liquidated through the sale of its assets upon reaching a future date as specified in the organizational documents or through a call arrangement. As controlling member, we have an obligation to cause these property owning entities to distribute proceeds from liquidation to the noncontrolling interest partner only if the net proceeds received by each of the entities from the sale of assets warrant a distribution based on the agreements. In addition, at any time after 90 days from the date of Inland Equity’s contribution, we have the option to call Inland Equity’s interest in IW JV for an amount which is the greater of either: (a) fair market value of Inland Equity’s interest or (b) $50,000, plus an additional distribution of $5,000 and any unpaid preferred return or promote, as defined within the organizational documents.

Further, if Inland Equity retains an ownership interest in IW JV through the liquidation of the joint venture, Inland Equity may be entitled to receive an additional distribution of $5,000, depending on the availability of proceeds at the time of liquidation.  Pursuant to the terms of the IW JV agreement, Inland Equity earns a preferred return of 6% annually, paid monthly and cumulative on any unpaid balance. Inland Equity earns an additional 5% annually, set aside monthly and paid quarterly, if the portfolio net income is above a target amount as specified in the organizational documents.

We currently anticipate exercising our call option prior to reaching the liquidation date. As a result, we are accreting the estimated additional amount we would be required to pay upon exercise of the call option over the anticipated exercise period of three years.

Related Person Transaction Policy

Our board of directors has adopted a Related Person Transaction Approval and Disclosure Policy for the review, approval or ratification of any related person transaction. This written policy provides that all related person transactions must be reviewed and approved by a majority of the disinterested directors on our board of directors in advance of us or any of our subsidiaries entering into the transaction; provided that, if we or any of our subsidiaries enter into a transaction without recognizing that such transaction constitutes a related person transaction, the approval requirement will be satisfied if such transaction is ratified by a majority of the disinterested directors on our board of directors promptly after we recognize that such transaction constituted a related person transaction. Disinterested directors are directors that do not have a personal financial interest in the transaction that is adverse to our financial interest or that of our shareholders. The term “related person transaction” refers to a transaction required to be disclosed by us pursuant to Item 404 of Regulation S-K (or any successor provision) promulgated by the SEC.

Previously, the Independent Directors Committee, a committee comprised of all of the independent directors, assisted the board of directors in discharging its responsibilities relating to reviewing, authorizing, approving, ratifying and monitoring all related person transactions, agreements and relationships. In particular, the Independent Directors Committee was responsible for evaluating, negotiating and concluding (or rejecting) any proposed contract or transaction with a related party; monitoring the performance of all related person contracts or transactions entered into; and determining whether existing and proposed related person contracts and transactions were fair and reasonable to us. The Independent Directors Committee operated under a written charter approved by our board of directors.

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Item 14.   Principal Accounting Fees and Services   

The following table sets forth fees for professional audit services rendered for the audits of our annual financial statements by Deloitte & Touche LLP and fees for other services rendered by them:

		2010		2009
Audit Fees (1)	$	890,000	$	675,000
Audit Related Fees (2)		342,500		277,000
Tax Fees (3)		332,480		337,048
Total Fees	$	1,564,980	$	1,289,048

(1)	Audit fees include the financial statement audit and audit of internal controls over financial reporting.  The 2009 audit fees exclude $220,000 of audit fees associated with KPMG LLP.
(2)	Audit related fees in 2010 primarily include the review of documents and issuance of independent registered public accounting firms’ consents related to documents filed with the SEC.  Audit related fees in 2010 and 2009 also include fees related to IW JV.
(3)	Tax fees consist of fees for review of federal and state income tax returns.  The 2009 tax fees exclude $136,857 of tax fees associated with KPMG LLP.

 The Audit Committee reviews and approves in advance the terms of and compensation for both audit and non-audit services to be provided by Deloitte & Touche LLP and KPMG LLP.  This duty has been delegated to the Chairman of the Audit Committee with any such pre-approval reported to the Audit Committee at its next regularly scheduled meeting.  Approval of non-audit services will be disclosed in periodic reports required by Section 13(a) of the Securities Exchange Act of 1934.  Prohibited Non-Audit Services shall be as set forth in the rules promulgated by the SEC, including: (i) bookkeeping or other services related to the accounting records or financial statements of the audit client; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, providing fairness opinions or preparing contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourci ng services; (vi) management functions or human resources; (vii) broker or dealer, investment advisor or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service that the Public Company Accounting Oversight Board prohibits through regulation.

The Audit Committee approved 100% of the fees described above.

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PART IV

Item 15.  Exhibits and Financial Statement Schedules

(a)  List of documents filed:

(1)

The consolidated financial statements of the Company are set forth in the report in Item 8.  

(2)

Financial Statement Schedules:

Financial statement schedules for the year ended December 31, 2010 is submitted herewith.

	Page
Valuation and Qualifying Accounts (Schedule II)	107
Real Estate and Accumulated Depreciation (Schedule III)	108

Schedules not filed:

All schedules other than those indicated in the index have been omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.

Exhibit No.	Description
3.1	Fifth Articles of Amendment and Restatement of Registrant (Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on October 15, 2010).
3.2	Fourth Amended and Restated Bylaws of the Registrant (Incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on October 15, 2010).
4.1	Specimen Certificate for the Shares (Included as Exhibit 4.1 to the Company’s Registration Statement on Form S-11 filed on March 13, 2003 [File No. 333-103799] and incorporated herein by reference).
10.1	Second Amended and Restated Independent Director Stock Option Plan of the Registrant (Incorporated herein by reference to Exhibit 10.5 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 and filed on February 26, 2010).
10.2	2008 Long-Term Equity Compensation Plan established May 13, 2008 of the Registrant (Incorporated herein by reference to Exhibit 10.575 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2008 and filed on March 31, 2009).
10.3	Indemnification Agreements by and between Inland Western Retail Real Estate Trust , Inc. and its directors and named executive officers (Incorporated herein by reference to Exhibits 10.6 A-F, and H-I to the Registrant’s Annual Report / Amended on Form 10-K/A for the year ended December 31, 2006 filed on April 27, 2007 and Exhibits 10.561 – 10.563, 10.567, 10.569 – 10.571 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2007 and filed on March 31, 2008).
10.4	Amended and Restated Credit Agreement dated as of February 4, 2011 among Inland Western Retail Real Estate Trust, Inc. as Borrower and KeyBank National Association as Administrative Agent, KeyBanc Capital Markets Inc. as Co-Lead Arranger and Joint Book Manager, and JPMorgan Chase Bank, N.A. as Syndication Agent and JPMorgan Securities LLC as Co-Lead Arranger and Joint Book Manager and Citibank, N.A. as Co-Documentation Agent, Deutsche Bank Securities Inc. as Co-Documentation Agent and RBC Capital Markets as Co-Documentation Agent and Certain Lenders from time to time parties hereto, as Lenders (filed herewith).
10.5	Loan Agreement dated as of December 1, 2009 by and among Colesville One, LLC, JPMorgan Chase Bank, N.A. and certain subsidiaries of the Registrant (Incorporated herein by reference to Exhibit 10.587 to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2009 and filed on March 5, 2010).

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Exhibit No.	Description
10.6	Senior Mezzanine Loan Agreement dated as of December 1, 2009 by and among IW Mezz 2009, LLC and JPMorgan Chase Bank, N.A. (Incorporated herein by reference to Exhibit 10.588 to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2009 and filed on March 5, 2010).
10.7	Junior Mezzanine Loan Agreement dated as of December 1, 2009 by and among IW Mezz 2 2009, LLC and JPMorgan Chase Bank, N.A. (Incorporated herein by reference to Exhibit 10.589 to the Registrant’s Annual Report on Form 10-K/A for the year ended December 31, 2009 and filed on March 5, 2010).
10. 8	Operating Agreement of IW JV 2009, LLC dated as of December 1, 2009 by and between the Registrant and Inland Equity Investors, LLC (Incorporated herein by reference to Exhibit 10.590 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009 and filed on February 26, 2010).
10.9	First Amendment to the Operating Agreement of IW JV 2009, LLC dated as of December 1, 2009, by and between Inland Western Retail Real Estate Trust, Inc. and Inland Equity Investors, LLC (Incorporated herein by reference to Exhibit 99.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 and filed on May 12, 2010).
21.1	List of Subsidiaries of Registrant (filed herewith).
23.1	Consent of Deloitte & Touche LLP (filed herewith).
23.2	Consent of KPMG LLP (filed herewith).
31.1	Certification of Chief Executive Officer, President, Chief Financial Officer and Treasurer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
31.2	Certification of Chief Accounting Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 (filed herewith).
32.1	Certification of Chief Executive Officer, President, Chief Financial Officer and Treasurer and Chief Accounting Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 and 18 U.S.C Section 1350 (filed herewith).

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

	/s/ Steven P. Grimes
By:	Steven P. Grimes
	President, Chief Executive Officer, Chief Financial Officer and Treasurer
Date:	February 23, 2011

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

	/s/ Steven P. Grimes		/s/ Frank A. Catalano, Jr.		/s/ Kenneth E. Masick
By:	Steven P. Grimes	By:	Frank A. Catalano, Jr.	By:	Kenneth E. Masick
	President, Chief Executive Officer, Chief Financial Officer and Treasurer		Director		Director
Date:	February 23, 2011	Date:	February 23, 2011	Date:	February 23, 2011
	/s/ James W. Kleifges		/s/ Paul R. Gauvreau		/s/ Barbara A. Murphy
By:	James W. Kleifges	By:	Paul R. Gauvreau	By:	Barbara A. Murphy
	Executive Vice President and Chief Accounting Officer		Director		Director
Date:	February 23, 2011	Date:	February 23, 2011	Date:	February 23, 2011
	/s/ Gerald M. Gorski		/s/ Brenda G. Gujral
By:	Gerald M. Gorski	By:	Brenda G. Gujral
	Chairman of the Board and Director		Director
Date:	February 23, 2011	Date:	February 23, 2011
	/s/ Kenneth H. Beard		/s/ Richard P. Imperiale
By:	Kenneth H. Beard	By:	Richard P. Imperiale
	Director		Director
Date:	February 23, 2011	Date:	February 23, 2011

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EX-10.4

Exhibit 10.4

AMENDED AND RESTATED CREDIT AGREEMENT

DATED AS OF FEBRUARY 4, 2011

AMONG

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.
AS BORROWER

AND

KEYBANK NATIONAL ASSOCIATION
AS ADMINISTRATIVE AGENT

KEYBANC CAPITAL MARKETS INC
AS CO-LEAD ARRANGER AND JOINT BOOK MANAGER

AND

JPMORGAN CHASE BANK, N.A.
AS SYNDICATION AGENT

JPMORGAN SECURITIES LLC
AS CO-LEAD ARRANGER AND JOINT BOOK MANAGER

AND

CITIBANK, N.A.
AS CO-DOCUMENTATION AGENT

DEUTSCHE BANK SECURITIES INC.
AS CO-DOCUMENTATION AGENT

RBC CAPITAL MARKETS*
AS CO-DOCUMENTATION AGENT

AND

CERTAIN LENDERS
FROM TIME TO TIME PARTIES HERETO,
AS LENDERS

*RBC Capital Markets is the global brand name for the corporate and investment banking business of Royal Bank of Canada and its affiliates.

TABLE OF CONTENTS

Page

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AMENDED AND RESTATED CREDIT AGREEMENT

This Amended and Restated Credit Agreement (the “Agreement”) dated as of February  4, 2011, is among Inland Western Retail Real Estate Trust, Inc., a corporation organized under the laws of the State of Maryland (the “Borrower”), KeyBank National Association, a national banking association, and the several banks, financial institutions and other entities from time to time parties to the Agreement (collectively, the “Lenders”), and KeyBank National Association, not individually, but as “Administrative Agent”.

RECITALS

A.

The Borrower is primarily engaged in the business of purchasing, owning, operating, leasing and managing retail properties.

B.

The Borrower is qualified as a real estate investment trust under Section 856 of the Code.

C.

The Borrower and certain of the Lenders are parties to a Credit Agreement dated as of October 15, 2007, as amended by that certain Comprehensive Amendment to Credit Agreement dated as of April 17, 2009 and Second Amendment thereto dated as of June 30, 2010 (collectively the “Original Credit Agreement”). This Agreement and the other Loan Documents, taken as whole, constitute an amendment and restatement of the Original Credit Agreement and the Loan Documents thereunder and not a novation, and the parties intend that all Advances outstanding thereunder shall continue to be Advances hereunder until repaid, and that all security interests in any Collateral created and perfected thereunder which is also Collateral hereunder shall continue to be security interests in such Collateral which relate back to the date that such security interests were first created and per fected and that the obligations of those Subsidiary Guarantors who were parties to the prior Subsidiary Guaranty with respect to the Borrower’s obligations under the Original Credit Agreement and are continuing as Subsidiary Guarantors hereunder shall continue in effect and relate back to the date such obligations were first undertaken, as such obligations may be expressly amended and restated hereunder.

D.

The Borrower has requested that the Administrative Agent and the Lenders enter into this Agreement to amend and restate the Original Credit Agreement to (i) increase the Aggregate Commitment thereunder, (ii) add a tranche of term Loans, (iii) extend the Facility Termination Date and (iv) modify certain of the terms thereof. The Administrative Agent and those existing and new Lenders executing this Agreement have agreed to do so on the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

ARTICLE I.
DEFINITIONS

As used in this Agreement:

“ABR Applicable Margin” means, as of any date, the Applicable Margin used to determine the Floating Rate, as determined from time to time in accordance with the definition of “Applicable Margin”.

“Acquisition” means any transaction, or any series of related transactions, consummated on or after the date of this Agreement, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any partnership, limited liability company, firm, corporation or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding partnership or membership interests of a partnership or limited liability company.

“Adjusted Collateral Pool NOI” means, as of any date, (A) an annualized amount calculated by multiplying the then-current Collateral Pool NOI times two (2) less (B) an annualized amount calculated by multiplying the Capital Expenditure Reserve Deduction for the two (2) fiscal quarters to which such Collateral Pool NOI applies times two (2).  To the extent that the aggregate amount of base and minimum rentals included in then-current Collateral Pool NOI attributable to a single tenant (or any group of tenants which are Affiliates of each other) would exceed ten percent (10%) of the total base and minimum rentals included in such Collateral Pool NOI, such excess shall be excluded from such Collateral Pool NOI for purposes of the calculations under this definition.

“Adjusted EBITDA” means, as of any date, the Consolidated Net Income for the most recent four (4) full fiscal quarters of the Borrower for which financial results have been reported, as adjusted, without duplication, by (i) deducting therefrom any income attributable to Excluded Tenants; (ii) adding or deducting for, as appropriate, any adjustment made under GAAP for straight lining of rents, gains or losses from sales of assets, extraordinary items, impairment and other non-cash charges, depreciation, amortization, interest expenses, taxes and the Consolidated Group Pro Rata Share of interest, taxes, depreciation and amortization in Investment Affiliates; (iii) deducting therefrom the Capital Expenditure Reserve Deduction for such period and (iv) adding back all master lease income (not to exceed 5% of Consolidated Net Income).

“Administrative Agent” means KeyBank National Association in its capacity as agent for the Lenders pursuant to Article X, and not in its individual capacity as a Lender, and any successor Administrative Agent appointed pursuant to Article X.

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“Advance” means a borrowing hereunder consisting of the aggregate amount of the several Loans made by one or more of the Lenders to the Borrower of the same Type and, in the case of LIBOR Rate Advances, for the same Interest Period, including without limitation Swingline Advances.

“Affiliate” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person.  A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

“Aggregate Commitment” means, as of any date, the aggregate of the then-current Term Commitments and Revolving Commitments of all the Lenders, which is, as of the Agreement Effective Date, $585,000,000.

“Agreement” is defined in the Recitals hereto.

“Agreement Effective Date” means the date this Agreement has been fully executed and delivered by the Borrower and the Lenders and the conditions set forth in Section 4.1 have been fulfilled or waived in accordance with the terms hereof.

“Alternate Base Rate” means, for any day, a rate of interest per annum equal to the higher of (i) the Prime Rate for such day, (ii) the sum of Federal Funds Effective Rate for such day plus 0.5% per annum, and (iii) the sum of the LIBOR Base Rate for a LIBOR Interest Period of one day, as determined by the Administrative Agent, plus 1.0% per annum.

“Applicable Margin” means the applicable margin set forth in the pricing schedule contained in Exhibit A used in calculating the interest rate applicable to the various Types of Advances, subject to the conditions set forth in Exhibit A with respect to the effective date of changes in such applicable margins.

“Appraisal” means an MAI certified appraisal of a Qualifying Collateral Pool Property performed in accordance with FIRREA and Administrative Agent’s appraisal requirements by an appraiser selected and retained by Administrative Agent, on behalf of the Lenders, at Borrower’s expense.

“Appraised Values” means, as of any date, the aggregate as-is values of the Qualifying Collateral Pool Properties as established by the most recent Appraisals thereof.

“Article” means an article of this Agreement unless another document is specifically referenced.

“Authorized Officer” means any of the President, Chief Financial Officer and Chief Operating Officer, or the Chairman and Chief Executive Officer, or the Chief Accounting Officer of the Borrower, or any other executive officer or authorized agent approved by the Administrative Agent on behalf of the Lenders acting singly.

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“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment, provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, provided, further, that such ownership interest does not result in or provide such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

“Borrower” is defined in the Recitals hereto.

“Borrowing Date” means a date on which an Advance is made hereunder.

“Borrowing Notice” is defined in Section 2.9.

“Business Day” means (i) with respect to any borrowing, payment or rate selection of LIBOR Rate Advances, a day (other than a Saturday or Sunday) on which banks generally are open in Cleveland, Ohio, Charlotte, N.C. and New York, New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in Cleveland, Ohio, Charlotte, N.C. and New York, New York for the conduct of substantially all of their commercial lending activities.

“Capital Expenditure Reserve Deduction” means, with respect to any group of Projects for any period, the sum of (a) $0.15 per annum per gross leaseable square foot times the weighted average gross leaseable area of those Projects owned by the Consolidated Group at any time during such period which are retail Projects (including mixed-use Projects that are primarily retail, but excluding “triple net” retail Projects which are instead included in clause (b) of this sentence), (b) $0.10 per annum per gross leaseable or net rentable, as applicable, square foot times the weighted average square footage of Projects owned by the Consolidated Group at any time during such period which are Projects leased on a “triple net” basis and (c) $0.25 per annum per gross leasable or net rentable, as applicable, square foot times the weighted average square footage o f Projects owned by the Consolidated Group at any time during such period which are not included in clause (a) or clause (b) of this sentence.

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person which is not a corporation and any and all warrants or options to purchase any of the foregoing.

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“Capitalization Rate” means eight percent (8.0%).

“Capitalized Lease” of a Person means any lease of Property imposing obligations on such Person, as lessee thereunder, which are required in accordance with GAAP to be capitalized on a balance sheet of such Person.

“Capitalized Lease Obligations” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.

“Cash Equivalents”  means, as of any date:

(i)

securities issued or directly and fully guaranteed or insured by the United States Government or any agency or instrumentality thereof having maturities of not more than one year from such date;

(ii)

mutual funds organized under the United States Investment Company Act rated AAm or AAm-G by S&P and P-1 by Moody’s;

(iii)

certificates of deposit or other interest-bearing obligations of a bank or trust company which is a member in good standing of the Federal Reserve System having a short term unsecured debt rating of not less than A-1 by S&P and not less than P-1 by Moody’s (or in each case, if no bank or trust company is so rated, the highest comparable rating then given to any bank or trust company, but in such case only for funds invested overnight or over a weekend) provided that such investments shall mature or be redeemable upon the option of the holders thereof on or prior to a date one month from the date of their purchase;

(iv)

certificates of deposit or other interest-bearing obligations of a bank or trust company which is a member in good standing of the Federal Reserve System having a short term unsecured debt rating of not less than A-1+ by S&P, and not less than P-1 by Moody’s and which has a long term unsecured debt rating of not less than A1 by Moody’s (or in each case, if no bank or trust company is so rated, the highest comparable rating then given to any bank or trust company, but in such case only for funds invested overnight or over a weekend) provided that such investments shall mature or be redeemable upon the option of the holders thereof on or prior to a date three months from the date of their purchase;

(v)

bonds or other obligations having a short term unsecured debt rating of not less than A-1+ by S&P and P-1+ by Moody’s and having a long term debt rating of not less than A1 by Moody’s issued by or by authority of any state of the United States, any territory or possession of the United States, including the Commonwealth of Puerto Rico and agencies thereof, or any political subdivision of any of the foregoing;

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(vi)

repurchase agreements issued by an entity rated not less than A-1+ by S&P, and not less than P-1 by Moody’s which are secured by U.S. Government securities of the type described in clause (i) of this definition maturing on or prior to a date one month from the date the repurchase agreement is entered into;

(vii)

short term promissory notes rated not less than A-1+ by S&P, and not less than P-1 by Moody’s maturing or to be redeemable upon the option of the holders thereof on or prior to a date one month from the date of their purchase; and

(viii)

commercial paper (having original maturities of not more than 365 days) rated at least A-1+ by S&P and P-1 by Moody’s and issued by a foreign or domestic issuer who, at the time of the investment, has outstanding long-term unsecured debt obligations rated at least A1 by Moody’s.

“Change in Control” means, at any time prior to the first date on which the Capital Stock of the Borrower is publicly traded on a national exchange, the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the Securities and Exchange Commission thereunder as in effect on the date hereof) of Capital Stock representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Borrower

“Change in Management” means the failure of at least one of Steven P. Grimes, Shane Garrison and Dennis Holland to continue to be active on a daily basis in the management of the Borrower provided that if all of such individuals shall die or become disabled or otherwise cease being active on a daily basis in the management of the Borrower, the Borrower shall have one hundred (120) days to retain a replacement executive of comparable experience who is reasonably satisfactory to the Administrative Agent.

“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

“Collateral” means all of the property, rights and interests of Borrower and its Subsidiaries that are subject to the security interests and Liens created by the Security Documents.

“Collateral Inclusion Conditions” is defined in Section 2.3(a).

“Collateral Pool” means, as of any date, all Qualifying Collateral Pool Properties which are then encumbered by Mortgages.

“Collateral Pool Debt Service” means, as of any date, an imputed annual amount of principal and interest that would be due on the Outstanding Facility Amount as of the last day of the most recent fiscal quarter of Borrower for which financial results have been reported if the Outstanding Facility Amount were a fully amortizing loan with equal monthly payments of

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principal and interest over a period of thirty years at a per annum interest rate equal to the greater of (a) 7.00% and (b) the sum of (i) the then current yield on obligations of the United States Treasury having the closest maturity date to the tenth (10th) anniversary of such date of calculation, and (ii) 2.50%.

“Collateral Pool Debt Service Coverage” means the Adjusted Collateral Pool NOI divided by Collateral Pool Debt Service.

“Collateral Pool Leverage Ratio” means the Outstanding Facility Amount divided by Collateral Pool Value, expressed as a percentage.

“Collateral Pool NOI” means, as of any date, the sum of (a) the aggregate Net Operating  Income for the most recent two (2) full fiscal quarters for which financial results of Borrower have been reported attributable to Qualifying Collateral Pool Properties owned for the entirety of such period plus, (b) in the case of any Qualifying Collateral Pool Property that was owned as of the last day of such period of two (2) fiscal quarters, but not so owned for the full period, the amount of Net Operating Income that would have been earned if such Qualifying Collateral Pool Property had been so owned for such period of two (2) full fiscal quarters, as established by Borrower and reasonably approved by the Administrative Agent on behalf of the Lenders.

“Collateral Pool Value” means, as of any date, (i) prior to the date on which financial results of Borrower for the quarter ending December 31, 2011 have been reported, the aggregate Appraised Values of the Qualifying Collateral Pool Properties then owned by Borrower or a Subsidiary Guarantor and included in the Collateral Pool (provided that the Appraised Values of the initial Qualifying Collateral Pool Properties used for the initial determination of Collateral Pool Value as of the Agreement Effective Date have not been finalized, but shall be finalized within thirty (30) days thereafter and upon such finalization Borrower shall take any action that may be required hereunder to reflect the resulting change, if any, in Collateral Pool Value), (ii) at all times after such date, the sum of (A) with respect to all Qualifying Collateral Pool Properties then owned by Borr ower or a Subsidiary Guarantor and included in the Collateral Pool which were so owned by Borrower or a Subsidiary Guarantor at all times during the most recent four (4) full fiscal quarters for which financial results of Borrower have been reported, the aggregate Adjusted Collateral Pool NOI attributable thereto (provided that the contribution to such aggregate Adjusted Collateral Pool NOI on account of any Project shall not in any event be a negative number) divided by the Capitalization Rate, provided that the contribution to Collateral Pool Value under this clause (A) on account of any Qualifying Collateral Pool Property which is a Single Tenant Project shall not, in any event, exceed the most recent Appraised Value of such Single Tenant Project; plus (B) with respect to all Qualifying Collateral Pool Properties not so owned at all times during such four (4) full fiscal quarters, the aggregate acquisition cost thereof.  For purposes of this definition, (i) to the extent that the aggregate contr ibution to Collateral Pool Value on account of Qualifying Collateral Pool Properties which are occupied pursuant to Financeable Ground Leases would exceed fifteen percent (15%) of Collateral Pool Value, such excess shall be excluded, (ii) to the extent that the aggregate contribution to Collateral Pool Value on account of any single Qualifying Collateral Pool Property (other than either of the Qualifying Collateral Pool Properties commonly known as South Park Meadows II and Boulevard at the Cap Center) would exceed twenty percent (20%)

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of Collateral Pool Value, such excess shall be excluded; (iii) to the extent that the aggregate contribution to Collateral Pool Value on account of Qualifying Collateral Pool Properties which are Single Tenant Projects where the remaining unexpired term of the Lease to the tenant of such Single Tenant Project (without giving effect to any unexercised options of such tenant to extend the term of such Lease) is less than five (5) years, would exceed $120,000,000, such excess shall be excluded. and (iv) to the extent that, after the second (2^nd) anniversary of the Agreement Effective Date, the aggregate contribution to Collateral Pool Value on account of Qualifying Collateral Pool Properties which are Single Tenant Projects where the remaining unexpired term of the Lease to the tenant of such Single Tenant Project (without giving effect to any unexercised option s of such tenant to extend the term of such Lease) is less than five (5) years, would exceed twenty percent (20%) of Collateral Pool Value, such excess shall be excluded. The Collateral Pool Value must exceed $350,000,000 at all times and there must be at least ten (10) Qualifying Collateral Pool Properties at all times, as required under Section 6.21(vi).  In addition, in the case of any Qualifying Collateral Pool Property where the maximum principal liability of the applicable Subsidiary Guarantor owning such Qualifying Collateral Pool Property has been limited in the related Mortgage due to mortgage tax, the amount contributed to Collateral Pool Value on account of such Qualifying Collateral Pool Property shall not in any event exceed such stated maximum principal liability.

“Commitment” means for each Lender collectively, such Lender’s Revolving Commitment and Term Commitment.

“Consolidated Debt Service” means, for any period, without duplication, (a) Consolidated Interest Expense for such period plus (b) the aggregate amount of scheduled principal payments attributable to Consolidated Outstanding Indebtedness (excluding optional principal payments, principal payments contingent on excess cash flow from a related Project and balloon payments made at maturity in respect of any such Indebtedness), plus (c) a percentage of all such principal payments made during such period by any Investment Affiliate on Indebtedness taken into account in calculating Consolidated Interest Expense, equal to the greater of (x) the percentage of the principal amount of such Indebtedness for which any member of the Consolidated Group is liable and (y) the Consolidated Group Pro Rata Share of such Investment Affiliate.

“Consolidated Group” means the Borrower and all Subsidiaries which are consolidated with it for financial reporting purposes under GAAP.

“Consolidated Group Pro Rata Share” means, with respect to any Investment Affiliate, the percentage of the total equity ownership interests held by the Consolidated Group in the aggregate, in such Investment Affiliate determined by calculating the greater of (i) the percentage of the issued and outstanding stock, partnership interests or membership interests in such Investment Affiliate held by the Consolidated Group in the aggregate and (ii) the percentage of the total book value of such Investment Affiliate that would be received by the Consolidated Group in the aggregate, upon liquidation of such Investment Affiliate, after repayment in full of all Indebtedness of such Investment Affiliate.

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“Consolidated Interest Expense” means, for any period without duplication, the sum of (a) the amount of interest expense, determined in accordance with GAAP, of the Consolidated Group for such period attributable to Consolidated Outstanding Indebtedness during such period plus (b) the applicable Consolidated Group Pro Rata Share of any interest expense, determined in accordance with GAAP, of each Investment Affiliate, for such period, whether recourse or non-recourse.

“Consolidated Net Income” means, for any period, consolidated net income (or loss) of the Consolidated Group for such period determined on a consolidated basis in accordance with GAAP.

“Consolidated Net Worth” means, as of any date of determination, an amount equal to (a) Total Asset Value minus (b) Consolidated Outstanding Indebtedness as of such date.

“Consolidated NOI” means, as of any date, for any entity or group of entities without duplication, the aggregate Net Operating Income for the most recent fiscal four (4) quarters for which financial results have been reported from all Projects owned by such entity or group of entities as of the end of such period of four (4) fiscal quarters.

“Consolidated Outstanding Indebtedness” means, as of any date of determination, without duplication, the sum of (a) all Indebtedness of the Consolidated Group outstanding at such date, determined on a consolidated basis in accordance with GAAP (whether recourse or non-recourse), plus, without duplication, (b) the applicable Consolidated Group Pro Rata Share of any Indebtedness of each Investment Affiliate other than Indebtedness of such Investment Affiliate to a member of the Consolidated Group.

“Construction in Progress” means, as of any date, the book value of any Projects then under development provided that a Project shall no longer be included in Construction in Progress and shall be valued based on its Net Operating Income upon the earlier of (i) the expiration of the second full fiscal quarter after substantial completion (which shall mean the receipt of a temporary certificate of occupancy or a final certificate of occupancy) of such Project and (ii) the last day of the first full fiscal quarter in which the Net Operating Income attributable to such Project for such fiscal quarter multiplied by four (4) and then divided by the Capitalization Rate exceeds the book value of such Project.  

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any of its Subsidiaries, are treated as a single employer under Section 414 of the Code.

“Conversion/Continuation Notice” is defined in Section 2.10.

“Credit Party” means the Administrative Agent, the Issuing Bank , the Swingline Lender or any other Lender.

“Default” means an event described in Article VII.

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“Defaulting Lender” means any Lender, as reasonably determined by the Administrative Agent, that (a) has failed, within three (3) Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Facility Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after written request by the Administrative Agent, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then outstanding Letters of Credit and Swingline Loans under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon the Administrative Agent’s receipt of such certification in form and su bstance satisfactory to it, or (d) has become the subject of a Bankruptcy Event.

“Default Rate” means the interest rate which may apply during the continuance of a Default pursuant to Section 2.12.

“Disclosure Letter” means that certain letter from Borrower addressed to the Administrative Agent on behalf of the Lenders and dated as of the Agreement Effective Date, which discloses certain matters which are exceptions to certain of the representations, warranties and covenants of Borrower under this Agreement.

“Dividend Payout Ratio” means, for any given period of time for any Person, the ratio of (a) an amount equal to (i) 100% of all dividends or other distributions, direct or indirect, on account of any equity interest of such Person (except dividends or distributions payable solely in additional equity interests of the same class) during such period, less (ii) any amount of such dividends or distributions constituting Dividend Reinvestment Proceeds, to (b) Funds From Operations of such Person for such period.

“Dividend Reinvestment Proceeds” means all dividends or other distributions, direct or indirect, on account of any equity interest of any Person which any holder(s) of such equity interest directs to be used, concurrently with the making of such dividend or distribution, for the purpose of purchasing for the account of such holder(s) additional equity interests in such Person or its subsidiaries.

“Eligible Assignee” means (a) another Lender, (b) with respect to any Lender, any Affiliate of that Lender or fund related to such Lender, (c) any commercial bank having a combined capital and surplus of $5,000,000,000 or more, (d) the central bank of any country

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which is a member of the Organization for Economic Cooperation and Development, (e) any savings bank, savings and loan association or similar financial institution which (A) has a net worth of $500,000,000 or more, (B) is engaged in the business of lending money and extending credit under credit facilities substantially similar to those extended under this Agreement and (C) is operationally and procedurally able to meet the obligations of a Lender hereunder to the same degree as a commercial bank, and (f) any other financial institution (including a mutual fund or other fund) approved by the Administrative Agent and, unless a Default shall have occurred and be continuing, Borrower (such approval not to be unreasonably withheld or delayed, and the failure of Borrower to expressly grant or deny any such approval within five (5) days after written request being deemed to b e the grant of such approval) having total assets of $500,000,000 or more which meets the requirements set forth in subclauses (B) and (C) of clause (e) above; provided that each Eligible Assignee must either (a) be organized under the Laws of the United States of America, any State thereof or the District of Columbia or (b) be organized under the Laws of the Cayman Islands or any country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of such a country, and (i) act hereunder through a branch, agency or funding office located in the United States of America and (ii) be exempt from withholding of tax on interest.  Notwithstanding anything herein to the contrary, at no time shall Borrower, its Affiliates, or any Subsidiary thereof, be considered an “Eligible Assignee.”

“Environmental Laws” means any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect, in each case to the extent the foregoing are applicable to the Borrower or any Subsidiaries or any of its respective assets or Projects.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder.

“Excluded Subsidiary” means, a Subsidiary which is (A) a single-purpose entity which owns only Projects subject to Secured Indebtedness and which has restrictions on the creation of any Guarantee Obligations or additional Indebtedness and other safeguards typically imposed on such single-purpose entities in secured financings or (B) an entity which is primarily engaged in the provision of services and does not own any Projects or (C) any Subsidiary that is not a Wholly-Owned Subsidiary of Borrower.

“Excluded Taxes” means, in the case of each Lender or applicable Lending Installation and the Administrative Agent, taxes imposed on its overall net income, and franchise taxes imposed on it, by any jurisdiction with taxing authority over the Lender.

“Excluded Tenants” means, as of any date, (i) any anchor tenant or (ii) any non-anchor tenant leasing more than 15,000 square feet of gross leaseable area at one of the Projects that, in either case, either (a) is subject to a voluntary or involuntary petition for relief under any federal or state bankruptcy codes or insolvency law or (b) is not operating its business in its

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demised premises at such Project unless such non-operating tenant’s lease obligations are guaranteed by an entity whose then current long-term, unsecured debt obligations are rated BBB- or above by S&P and Baa3 or above by Moody’s.

“Existing Facility Letters of Credit” means those Facility Letters of Credit issued under the Original Credit Agreement, as identified on Schedule 3 attached hereto, which shall remain outstanding on the Agreement Effective Date and constitute Facility Letters of Credit under this Agreement.

“Extension Notice” is defined in Section 2.1.

“Facility Letter of Credit” means a Letter of Credit issued hereunder plus the Existing Facility Letters of Credit.

“Facility Letter of Credit Fee” is defined in Section 2A.8.

“Facility Letter of Credit Obligations” means, as at the time of determination thereof, all liabilities, whether actual or contingent, of the Borrower with respect to Facility Letters of Credit, including the sum of (a) the Reimbursement Obligations and (b) the aggregate undrawn face amount of the then outstanding Facility Letters of Credit.

“Facility Letter of Credit Sublimit” means $50,000,000.

“Facility Termination Date” means February 3, 2013, as such date may be extended pursuant to Section 2.1.

“Federal Funds Effective Rate” shall mean, for any day, the rate per annum (rounded upward to the nearest one one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of Cleveland on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate.”

“Fee Letter” is defined in Section 2.6.

“Financeable Ground Lease” means, a ground lease reasonably satisfactory to the Administrative Agent on behalf of the Lenders, which must provide customary protections for a potential leasehold mortgagee (“Mortgagee”) such as (i) a remaining term, including any optional extension terms exercisable unilaterally by the tenant, of no less than 25 years, (ii) a provision that the ground lease will not be terminated until the Mortgagee has received notice of a default, has had a reasonable opportunity to cure and has failed to do so, (iii) provision for a new lease to the Mortgagee as tenant on the same terms if the ground lease is terminated for any reason, (iv) transferability of the tenant’s interest under the ground lease by the Mortgagee without any requirement for consent of the ground lessor unless based on delivery of customary assignment and assumption agreements from the transferor and transferee, (v) the ability of the tenant to mortgage tenant’s interest under the ground lease without any requirement  for

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consent of the ground lessor and (iv) provisions that the tenant under the ground lease (or the leasehold mortgagee) has customary protections with respect to the application of insurance proceeds or condemnation awards attributable to the tenant’s interest under the ground lease and related improvements.

“Financial Contract” of a Person means (i) any exchange - traded or over-the-counter futures, forward, swap or option contract or other financial instrument with similar characteristics, or (ii) any Rate Management Transaction.

“Financial Undertaking” of a Person means (i) any transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the consolidated balance sheet of such Person, or (ii) any agreements, devices or arrangements designed to protect at least one of the parties thereto from the fluctuations of interest rates, exchange rates or forward rates applicable to such party’s assets, liabilities or exchange transactions, including, but not limited to, interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options.

“First Mortgage Receivable” means any Indebtedness owing to a member of the Consolidated Group which is secured by a first-priority mortgage, deed to secure debt or deed of trust on commercial real estate having a value in excess of the amount of such Indebtedness and which has been designated by the Borrower as a “First Mortgage Receivable” in its most recent compliance certificate.

“Fixed Charge Coverage Ratio” means (i) Adjusted EBITDA divided by (ii) the sum of (A) Consolidated Debt Service for the most recent four (4) fiscal quarters for which financial results have been reported, plus (B) all Preferred Dividends, if any, payable with respect to such four (4) fiscal quarters.

“Floating Rate” means, for any day, a rate per annum equal to (i) the Alternate Base Rate for such day plus (ii) ABR Applicable Margin for such day, in each case changing when and as the Alternate Base Rate and ABR Applicable Margin change.

“Floating Rate Advance” means an Advance which bears interest at the Floating Rate.

“Floating Rate Loan” means a Loan which bears interest at the Floating Rate.

“Funds From Operations” means, with respect to a Person and for a given period, an amount equal to the net income (or loss) of such Person for such period, computed in accordance with GAAP, excluding gains (or losses) from extraordinary items, impairment and other non-cash charges, plus real estate depreciation and amortization, and after adjustments for unconsolidated affiliates.

“GAAP” means generally accepted accounting principles in the United States of America as in effect from time to time, applied in a manner consistent with that used in preparing the financial statements referred to in Section 6.1.

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“Governmental Authority” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Guarantee Obligation” means, as to any Person (the “guaranteeing person”), any obligation (determined without duplication) of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any Letter of Credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counter-indemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the “primary obligations”) of any other third Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefore, (ii) to advance or supply fund s (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business or guarantees by the Borrower of liabilities under any interest rate lock agreement utilized to facilitate Secured Indebtedness of another member of the Consolidated Group or an Investment Affiliate. The amount of any Guarantee Obligation of any guaranteeing Person shall be deemed to be the maximum stated amount of the primary obligation relating to such Guarantee Obligation (or, if less, the maximum stated liability set forth in the instrument embodying such Guarantee Obligation), provided, that in the absence of any such stated amount or stated liability, the amount of such Guarantee Obligation shall be such guaranteeing Person’s reasonably anticipated liability in respect thereof as determined by the Borrower in good faith with respect to any such Guarantee Obligations of the Consolidated Group.

“Hazardous Materials” means all contaminants, vibrations, sound, odor, explosive or radioactive substances or wastes and hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, mold, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

“Indebtedness” of any Person at any date means without duplication, (a) all indebtedness of such Person for borrowed money including without limitation any repurchase obligation or liability of such Person with respect to securities, accounts or notes receivable sold by such Person, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), to the extent such obligations constitute indebtedness for the purposes of GAAP (excluding premiums or discounts on debt required to be recognized under GAAP), (c) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (d) all Capitalized Lease Obligations, (e) all

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obligations of such Person in respect of acceptances issued or created for the account of such Person, (f) all Guarantee Obligations of such Person (excluding in any calculation of consolidated Indebtedness of the Consolidated Group, Guarantee Obligations of one member of the Consolidated Group in respect of primary obligations of any other member of the Consolidated Group), (g) all reimbursement obligations of such Person for letters of credit and other contingent liabilities, (h) any Net Mark-to-Market Exposure and (i) all liabilities secured by any Lien (other than Liens for taxes not yet due and payable) on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof.

“Interest Period” means a LIBOR Interest Period.

“Investment” of a Person means any Property owned by such Person, including without limitation, any loan, advance (other than commission, travel and similar advances to officers and employees made in the ordinary course of business), extension of credit (other than accounts receivable arising in the ordinary course of business on terms customary in the trade), deposit account or contribution of capital by such Person to any other Person or any investment in, or purchase or other acquisition of, the stock, partnership interests, notes, debentures or other securities of any other Person made by such Person.

“Investment Affiliate” means any Person in which the Consolidated Group, directly or indirectly, has a ten percent (10%) or greater ownership interest, whose financial results are not consolidated under GAAP with the financial results of the Consolidated Group.

“Issuance Date” is defined in Section 2A.4(a)(2).

“Issuance Notice” is defined in Section 2A.4(c).

“Issuing Bank” means, with respect to each Facility Letter of Credit, the Lender which issues such Facility Letter of Credit.  KeyBank shall be the sole Issuing Bank.

“Leases” shall mean, collectively, all leases, subleases and occupancy agreements affecting the Qualifying Collateral Pool Properties, or any part thereof, now existing or hereafter executed and all material amendments, material modifications or supplements thereto.

“Lenders” means the lending institutions listed on the signature pages hereof, their respective successors and assigns, and any other lending institutions that subsequently become parties to this Agreement.

“Lending Installation” means, with respect to a Lender, any office, branch, subsidiary or affiliate of such Lender.

“Letter of Credit” of a Person means a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or for which such Person is in any way liable.

“Letter of Credit Collateral Account” is defined in Section 2A.9.

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“Letter of Credit Request” is defined in Section 2A.4(a).

“Leverage Ratio” means Consolidated Outstanding Indebtedness divided by Total Asset Value, expressed as a percentage.

“LIBOR Applicable Margin” means, as of any date with respect to any LIBOR Interest Period, the Applicable Margin used to determine the LIBOR Rate as determined from time to time in accordance with the definition of “Applicable Margin”.

“LIBOR Base Rate” means, with respect to a LIBOR Rate Advance for the relevant LIBOR Interest Period, the applicable British Bankers’ Association LIBOR rate (rounded upwards to the nearest 1/16th) for deposits in U.S. dollars as reported by any generally recognized financial information service as of 11:00 a.m. (London time) two Business Days prior to the first day of such LIBOR Interest Period, and having a maturity equal to such LIBOR Interest Period, provided that, if no such British Bankers’ Association LIBOR rate is available to the Administrative Agent, the applicable LIBOR Base Rate for the relevant LIBOR Interest Period shall instead be the rate determined by the Administrative Agent to be the rate at which KeyBank or one of its Affiliate banks offers to place deposits in U.S. dollars with first class banks in the London interbank market at approxima tely 11:00 a.m. (London time) two Business Days prior to the first day of such LIBOR Interest Period, in the approximate amount of the relevant LIBOR Rate Advance and having a maturity equal to such LIBOR Interest Period.

“LIBOR Interest Period” means, with respect to each amount bearing interest at a LIBOR based rate, a period of one, two, three, six or twelve months, to the extent deposits in the London interbank market with such maturities are available to the Lenders, commencing on a Business Day, as selected by Borrower; provided, however, that (i) any LIBOR Interest Period which would otherwise end on a day which is not a Business Day shall continue to and end on the next succeeding Business Day, unless the result would be that such LIBOR Interest Period would be extended to the next succeeding calendar month, in which case such LIBOR Interest Period shall end on the next preceding Business Day and (ii) any LIBOR Interest Period which begins on a day for which there is no numerically corresponding date in the calendar month in which such LIBOR Interest Period would otherwise end shall instead end on the last Business Day of such calendar month.  Notwithstanding the foregoing, at any one time there will be no more than seven (7) LIBOR Interest Periods outstanding.

“LIBOR Loan” means a Loan which bears interest at a LIBOR Rate.

“LIBOR Rate” means, for any LIBOR Interest Period, the sum of (A) the LIBOR Base Rate applicable thereto divided by one minus the then-current Reserve Requirement and (B) the LIBOR Applicable Margin in effect from time to time during the applicable LIBOR Interest Period, changing when and as the LIBOR Applicable Margin changes.

“LIBOR Rate Advance” means an Advance which bears interest at a LIBOR Rate.

“LIBOR Rate Loan” means a Loan which bears interest at a LIBOR Rate.

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“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).

“Loan” means, with respect to a Lender, such Lender’s portion of any borrowing hereunder by the Borrower.

“Loan Documents” means this Agreement, the Disclosure Letter, the Subsidiary Guaranty, the Notes, the Security Documents and any other document from time to time evidencing or securing indebtedness incurred by the Borrower under this Agreement, as any of the foregoing may be amended or modified from time to time.

“Majority Lenders” means Lenders holding a majority of the Percentages.

“Management Fees”, means, with respect to each Project for any period, an amount equal to the greater of (i) actual management fees payable with respect thereto and (ii) three percent (3%) per annum on the aggregate base rent and percentage rent due and payable under leases at such Project.

“Marketable Securities” means Investments in Capital Stock or debt securities issued by any Person (other than an Investment Affiliate) which are publicly traded on a national exchange, excluding Cash Equivalents.

“Material Adverse Effect” means, in the Administrative Agent’s reasonable discretion, a material adverse effect on (i) the business, property or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole, (ii) the ability of the Borrower and the Subsidiary Guarantors, taken as a whole, to perform their obligations under the Loan Documents, or (iii) the validity or enforceability of any of the Loan Documents.

“Materials of Environmental Concern” means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

“Maximum Legal Rate” means the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or in the Note or other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions hereof.

“Moody’s” means Moody’s Investors Service, Inc. and its successors.

“Mortgages” shall mean first priority, recorded mortgages or deeds of trust encumbering the Qualifying Collateral Pool Properties which are wholly owned by Subsidiary Guarantors which are Wholly-Owned Subsidiaries of Borrower, executed in each case by a Subsidiary

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Guarantor and securing the Obligations in substantially the same form as is attached hereto as Exhibit I and made a part hereof, with such modifications are reasonably satisfactory to the Administrative Agent on behalf of the Lenders, to be executed, delivered and recorded as provided herein, including without limitation those Mortgages so executed, delivered and recorded pursuant to the Original Credit Agreement as amended as provided herein.

“Multiemployer Plan” means a Plan maintained pursuant to a collective bargaining agreement or any other arrangement to which the Borrower or any member of the Controlled Group is a party to which more than one employer is obligated to make contributions.

“Negative Pledge” means, with respect to a given asset, any provision of a document, instrument or agreement (other than any Loan Document) which prohibits or purports to prohibit the creation or assumption of any Lien on such asset as security for Indebtedness of the Person owning such asset or any other Person.

“Net Mark-to-Market Exposure” of a Person means, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions or any other Financial Contract.  “Unrealized losses” means the fair market value of the cost to such Person of replacing such Rate Management Transaction or other Financial Contract as of the date of determination (assuming the Rate Management Transaction or other Financial Contract were to be terminated as of that date), and “unrealized profits” means the fair market value of the gain to such Person of replacing such Rate Management Transaction or other Financial Contract as of the date of determination (assuming such Rate Management Transaction or other Financial Contract were to be terminated as of that date).

“Net Operating Income” means, with respect to any Project for any period, “property rental and other income” (as determined by GAAP) attributable to such Project accruing for such period, without regard for straight-lining of rents or any amortization related to above-market or below-market leases, plus all master lease income (not to exceed to 5% of Net Operating Income), minus the amount of all expenses (as determined in accordance with GAAP) incurred in connection with and directly attributable to the ownership and operation of such Project for such period, including, without limitation, Management Fees and amounts accrued for the payment of real estate taxes and insurance premiums, but excluding any general and administrative expenses related to the operation of the Borrower, any interest expense, or other debt service charges, impairment charges, the effects of straight-lining of ground lease rent, bad debt expenses related to the straight-lining of rents and any other non-cash charges such as depreciation or amortization of financing costs.    

“Non-U.S. Lender” is defined in Section 3.5(iv).

“Note” means any one of those promissory notes dated in the form of Exhibit B attached hereto from Borrower in favor of the Lenders, including any amendment, modification, renewal or replacement of any such promissory note or of any note delivered under the Original Credit Agreement, provided that, at the request of any Lender, a Note payable to such Lender shall not be issued and the Obligations of the Borrower hereunder to such Lender shall be evidenced

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entirely by this Agreement and the other Loan Documents with the same effect as if a Note had been issued to such Lender.

“Notice of Assignment” is defined in Section 12.3.2.

“Obligations” means the Advances, the Facility Letters of Credit, the Reimbursement Obligations, and all accrued and unpaid fees and all other obligations of Borrower to the Administrative Agent or the Lenders arising under this Agreement or any of the other Loan Documents, including all payments and other obligations that may accrue after the commencement of any action or proceeding described in Sections 7.7 and 7.8.

“One Day LIBOR Rate” means, with respect to Swingline Advances only, for any day, the sum of (A) an interpolated rate, as determined by the Swingline Lender in its sole discretion,  for such day, equal to the LIBOR Base Rate that would apply to an Interest Period of one day plus (B) the LIBOR Applicable Margin.

“Original Credit Agreement” is defined in the Recitals to this Agreement.

“Other Taxes” is defined in Section 3.5(ii).

“Outstanding Facility Amount” means, at any time, the sum of all then outstanding Advances and Facility Letter of Credit Obligations.

“Outstanding Revolving Amount” means, at any time the sum of all then-outstanding Revolving Advances and Facility Letter of Credit Obligations.

“Parent” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a subsidiary.

“Participants” is defined in Section 12.2.1.

“Payment Date” means, with respect to the payment of interest accrued on any Advance, the fifteenth day of each calendar month.

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Percentage” means for each Lender the ratio that such Lender’s combined Revolving Commitment and outstanding Term Loans bears to the Aggregate Commitment, or if the Revolving Commitments have been terminated, the ratio that such Lender’s combined outstanding Revolving Loans and outstanding Term Loans bears to the total outstanding Advances, in each case expressed as a percentage.

“Permitted Acquisitions” are defined in Section 6.15.

“Permitted Investments” are defined in Section 6.23.

“Permitted Liens” are defined in Section 6.16.

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“Person” means any natural person, corporation, limited liability company, joint venture, partnership, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

“Plan” means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Borrower or any member of the Controlled Group may have any liability.

“Preferred Dividends” means, with respect to any entity, dividends or other distributions which are payable to holders of any ownership interests in such entity which entitle the holders of such ownership interests to be paid on a preferred basis prior to dividends or other distributions to the holders of other types of ownership interests in such entity, provided that distributions payable by IW JV 2009 LLC to Inland Equity Investors, LLC or any of its successors or assigns shall be excluded from ”Preferred Dividends”.

“Prime Rate” means a rate per annum equal to the prime rate of interest publicly announced from time to time by KeyBank or its parent as its prime rate (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes.  In the event that there is a successor to the Administrative Agent by merger, or the Administrative Agent assigns its duties and obligations to an Affiliate, then the term “Prime Rate” as used in this Agreement shall mean the prime rate, base rate or other analogous rate of the new Administrative Agent.

“Project” means any real estate asset located in the United States owned by the Borrower or any of its Subsidiaries or any Investment Affiliate, and operated or intended to be operated as a retail property, a triple net office property, an industrial property or a mixed use property.

“Property” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

“Purchasers” is defined in Section 12.3.1.

“Qualifying Collateral Pool Property” means any Project which, as of any date of determination, (a) located in the United States; (b) is wholly owned by a Subsidiary Guarantor, in fee simple or under the terms of a Financeable Ground Lease; (c) is encumbered by a Mortgage in favor of the Administrative Agent on behalf of the Lenders; (d) is free of all structural defects or major architectural deficiencies, title defects, environmental conditions or other adverse matters except for defects, deficiencies, conditions or other matters individually or collectively which are not material to the profitable operation of such Project as evidenced by a certification of the Borrower, subject to the Administrative Agent’s approval, in its sole discretion; (e) is not, nor is any direct or indirect interest of the Borrower or any Subsidiary therein, subject to any Lien other than Permitted Liens set forth in clauses (i) through (iv) of Section 6.16 or to any Negative Pledge (other than the Liens and Negative Pledges created pursuant to this Agreement to secure the obligations of the Borrower and the Subsidiary Guarantors); (f) when

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aggregated with all other Qualifying Collateral Pool Properties, results in the Qualifying Collateral Pool Properties as a whole having at least eighty percent (80%) of their aggregate gross leaseable area physically occupied and (g) if such Project is a Single Tenant Project which is not either one of the Qualifying Collateral Pool Properties included in the Collateral Pool on the Agreement Effective Date or one of those Projects being proposed by Borrower for subsequent evaluation and admission as a Qualifying Collateral Pool Property as listed on Schedule 4 attached hereto, the remaining unexpired term of the Lease to the tenant of such Project (without giving effect to any unexercised options of such tenant to extend the terms of such Lease) was, as of the date such Project was first admitted as a Qualifying Collateral Pool Property,  not less than five (5) years.

“Rate Management Transaction” means any transaction (including an agreement with respect thereto) now existing or hereafter entered into by the Borrower which is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices, equity prices or other financial measures.

“Recourse Indebtedness” means any Indebtedness of the Borrower or any other member of the Consolidated Group with respect to which the liability of the obligor is not limited to the obligor’s interest in specified assets securing such Indebtedness, subject to customary limited exceptions for certain acts or types of liability such as environmental liability, fraud and other customary nonrecourse carveouts.

“Regulation D” means Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor thereto or other regulation or official interpretation of said Board of Governors relating to reserve requirements applicable to member banks of the Federal Reserve System.

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.

“Reimbursement Obligations” means at any time, the aggregate of the obligations of the Borrower to the Lenders, the Issuing Bank and the Administrative Agent in respect of all unreimbursed payments or disbursements made by the Lenders, the Issuing Bank and the Administrative Agent under or in respect of the Facility Letters of Credit.

“Release” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, disposing, or dumping or any Hazardous Material into the environment.

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“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

“Required Diligence” is defined in Section 2.3.

“Required Lenders” means Lenders in the aggregate having at least 66 2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been terminated, Lenders in the aggregate holding at least 66 2/3% of the aggregate unpaid principal amount of the outstanding Advances, provided that, (i) the Commitments and Advances held by any then-current Defaulting Lender shall be subtracted from the Aggregate Commitment and the outstanding Advances solely for the purpose of calculating the Required Lenders at such time, (ii) at such times as there are less than four (4) Lenders the two references to “at least 66 2/3%” in this definition shall be changed to “more than 50%”, (iii) determination of Required Lenders for purposes of approving any portion of any proposed amendment to or waiver of any provision of the Agreement that affects the rights and obligat ions of the Lenders holding Term Commitments in a manner different from the corresponding amendment to or waiver of the rights and obligations of the Lenders holding the Revolving Commitments, approval shall only be deemed to be given if Lenders holding the applicable required percentage of just the aggregate Term Commitments or Term Advances, as applicable, have approved such action and (iv) determination of Required Lenders for purposes of approving any portion of any proposed amendment to or waiver of any provision of the Agreement that affects the rights and obligations of the Lenders holding Revolving Commitments in a manner different from the corresponding amendment to or waiver of the rights and obligations of the Lenders holding the Term Commitments, approval shall only be deemed to be given if Lenders holding the applicable required percentage of just the aggregate Revolving Commitments or Revolving Advances, as applicable, have approved such action .

“Reserve Requirement” means, with respect to a LIBOR Rate Loan and LIBOR Interest Period, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Federal Reserve Board or other governmental authority or agency having jurisdiction with respect thereto for determining the maximum reserves (including, without limitation, basic, supplemental, marginal and emergency reserves) for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D) maintained by a member bank of the Federal Reserve System.

“Revolving Advance” means any Advance comprised solely of Revolving Loans.

“Revolving Commitment” means, for each Lender, the obligation of such Lender to make Revolving Loans on the terms and conditions set forth herein not exceeding the amount set forth opposite its signature below or as set forth in any Notice of Assignment relating to any

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assignment that has become effective pursuant to Section 12.3.2, as such amount may be modified from time to time pursuant to the terms hereof.

“Revolving Loan” means any Loan made pursuant to a Lender’s Revolving Commitment.

“Secured Indebtedness” means any Indebtedness of the Borrower or any other member of the Consolidated Group which is secured by a Lien on a Project, any ownership interests in any Person or any other assets which had, in the aggregate, a value in excess of the amount of such Indebtedness at the time such Indebtedness was incurred.

“Security Documents” means the Mortgages, and any other security documents executed and delivered to the Administrative Agent for the benefit of the Lenders, including, without limitation, any UCC-1 financing statements delivered or authorized to be filed by the Administrative Agent in connection therewith.

“Section” means a numbered section of this Agreement, unless another document is specifically referenced.

“Single Employer Plan” means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group.

“Single Tenant Project” means any Project that is leased (or is being constructed to be leased) to a single tenant.

“S&P” means Standard & Poor’s Ratings Group and its successors.

“Subsidiary” of a Person means (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.  Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a Subsidiary of the Borrower.

“Subsidiary Guarantor” means, as of any date, each Subsidiary of the Borrower which is then a party to the Subsidiary Guaranty pursuant to Section 6.26.

“Subsidiary Guaranty” means the guaranty to be executed and delivered by those Subsidiaries of the Borrower listed on Schedule 2, substantially in the form of Exhibit F, as the same may be amended, supplemented or otherwise modified from time to time pursuant to Section 6.26, including any joinders executed by additional Subsidiary Guarantors.

“Substantial Portion” means, with respect to the Property of the Borrower and its Subsidiaries, Property which represents more than 10% of then-current Total Asset Value.

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“Swingline Advances” means, as of any date, collectively, all Swingline Loans then outstanding under this Facility.

“Swingline Commitment” means the obligation of the Swingline Lender to make Swingline Loans not exceeding $50,000,000, which is included in, and is not in addition to, the Swingline Lender’s total Commitment hereunder.

“Swingline Lender” shall mean KeyBank National Association, in its capacity as a Lender, and at the option of a new Administrative Agent, any successor Administrative Agent.

“Swingline Loan” means a loan made by the Swingline Lender pursuant to Section 2.16 hereof.

“Taxes” means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and any and all liabilities with respect to the foregoing, but excluding Excluded Taxes and Other Taxes.

“Term Advance” means any Advance comprised solely of Term Loans.

“Term Commitment” means, for each Lender, the obligation of such Lender to make Term Loans on the terms and conditions set forth herein not exceeding the applicable amount set forth opposite its signature below or as set forth in any Notice of Assignment relating to any assignment that has become effective pursuant to Section 12.3.2, as such amount may be modified from time to time pursuant to the terms hereof.

“Term Loan” means any Loan made pursuant to a Lender’s Term Commitment.

“Total Asset Value” means, as of any date, (i) (A) the Consolidated NOI attributable to Projects owned by the Borrower or a member of the Consolidated Group (excluding 100% of the Consolidated NOI attributable to Projects not owned for at least four (4) full fiscal quarters as of the end of the fiscal quarter for which Consolidated NOI is calculated and provided that the contribution to Consolidated NOI on account of any Project shall not in any event be a negative number) divided by (B) the Capitalization Rate, plus (ii) 100% of the price paid for any such Projects first acquired by the Borrower or a member of the Consolidated Group during such four (4) fiscal quarter period, plus (iii) cash, Cash Equivalents and Marketable Securities owned by the Consolidated Group as of the end of such fiscal quarter, provided that the amount added to Total Asset Value on account o f Marketable Securities shall not exceed 5% of Total Asset Value, plus (iv) the Consolidated Group’s Pro Rata Share of (A) Consolidated NOI attributable to Projects owned by Investment Affiliates (excluding Consolidated NOI attributable to Projects not owned for the entire four (4) fiscal quarters on which Consolidated NOI is calculated and provided that the contribution to Consolidated NOI on account of any Project shall not in any event be a negative number) divided by (B) the Capitalization Rate, plus (v) the Consolidated Group Pro Rata Share of the price paid for such Projects first acquired by an Investment Affiliate during such four (4) fiscal quarters, plus (vi) Construction in Progress at book value, plus (vii) First Mortgage Receivables owned by the Consolidated Group (at the lower of book value or market value), plus (viii) Unimproved Land at book value.

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“Transferee” is defined in Section 12.4.

“Type” means, with respect to any Advance, its nature as either a Floating Rate Advance or LIBOR Rate Advance and as either a Revolving Advance or Term Advance.

“Unfunded Liabilities” means the amount (if any) by which the present value of all vested nonforfeitable benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans.

“Unimproved Land” means, as of any date, any land which (i) is not appropriately zoned for retail development, (ii) does not have access to all necessary utilities or (iii) does not have access to publicly dedicated streets, unless such land has been designated in writing by the Borrower in a certificate delivered to the Administrative Agent as land that is reasonably expected to satisfy all such criteria within twelve (12) months after such date.  For purposes of clarification, if any, such land shall be deemed to be included in Construction in Progress as of such date of designation and from and after such date shall not be considered Unimproved Land.

“Unmatured Default” means an event which but for the lapse of time or the giving of notice, or both, would constitute a Default.

“Unsecured Indebtedness” means, with respect to any Person, all Indebtedness of such Person for borrowed money that does not constitute Secured Indebtedness or Guarantee Obligations.

“Unused Fee” is defined is Section 2.5.

“Unused Fee Percentage” means, with respect to any day during a calendar quarter, (i) 0.40% per annum, if the sum of the Revolving Advances and Facility Letter of Credit Obligations outstanding on such day is 50% or more of the aggregate Revolving Commitments or (ii) 0.50% per annum if the sum of the Revolving Advances and Facility Letter of Credit Obligations outstanding on such day is less than 50% of the aggregate Revolving Commitments.

“Wholly-Owned Subsidiary” of a Person means (i) any Subsidiary all of the outstanding voting securities of which shall at the time be owned or controlled, directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited liability company, association, joint venture or similar business organization 100% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled.

The foregoing definitions shall be equally applicable to both the singular and plural forms of the defined terms.

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ARTICLE II.
THE CREDIT

2.1.

Generally

.  Subject to the terms and conditions of this Agreement, Lenders severally agree to make Advances through the Administrative Agent to the Borrower from time to time prior to the Facility Termination Date, and to support the issuance of Facility Letters of Credit under Article IIA of this Agreement, provided that the making of any such Advance or the issuance of such Facility Letter of Credit will not:

(i)

cause the then current Outstanding Facility Amount to exceed the then-current Aggregate Commitment; or

(ii)

cause the sum of (A) the then-current Outstanding Revolving Amount and (B) the then-current outstanding Swingline Advances to exceed the then-current aggregate Revolving Commitments;

(iii)

cause the aggregate amount of Term Advances to exceed the aggregate Term Commitments;

(iv)

cause the then-current outstanding Swingline Advances to exceed the Swingline Commitment; or

(v)

cause the then-outstanding Facility Letters of Credit Obligations to exceed the Facility Letter of Credit Sublimit; or

(vi)

cause the Collateral Pool Leverage Ratio to exceed (A) prior to the issuance of Borrower’s financial results for the quarter ending March 31, 2012, sixty-five percent (65%) of the Collateral Pool Value and (B) at all times thereafter, sixty percent (60%) of the Collateral Pool Value; or

(vii)

cause the Collateral Pool Debt Service Coverage to be less than (A) prior to the issuance of Borrower’s financial results for the quarter ending March 31, 2012, 1.50 to 1.00, and (B) at all times thereafter, 1.60 to 1.00.

The Advances may be Swingline Advances, ratable Floating Rate Advances or ratable LIBOR Rate Advances.  Each Lender shall fund its Percentage of each such Advance (other than a Swingline Advance) and no Lender will be required to fund any amounts which, when aggregated with such Lender’s Percentage of all other Advances then outstanding and of all Facility Letter of Credit Obligations, would exceed such Lender’s then-current Commitment.  This facility (“Facility”) is both a term loan and a revolving credit facility.  There will be a single Term Advance made on the Agreement Effective Date when all conditions precedent thereto have been satisfied or waived.  Such initial Term Advance shall fully satisfy the Lenders’ obligations under their Term Commitments and once repaid or prepaid the Term Loans may not be reborrowed.  Subject to the provisions of this Agreement, Borrower may request Revolving Advances hereunder from time to time, repay such Revolving Advances and reborrow Revolving Advances at any time prior to the Facility Termination Date.  The Facility Termination Date can be extended at the Borrower’s request for one (1) extension period of one year upon

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written notice to the Administrative Agent received by the Administrative Agent not later than 90 days prior to the then-current Facility Termination Date (an “Extension Notice”), provided that (i) no Default or Unmatured Default has occurred and is continuing when the Extension Notice is given and on the day immediately preceding the first day of such extension period, (ii) all of the covenants of the Borrower hereunder are being complied with when an Extension Notice is given and on the day immediately preceding the first day of such extension period, and (iii) the Borrower pays, along with the Extension Notice, an extension fee to the Administrative Agent for the account of each Lender equal to two-fifths of one percent (0.40%) of the sum of (A) the then-current outstanding Term Loans of such Lender plus (B) the then-current Revolving Commitment of s uch Lender.  In no event shall the Facility Termination Date be extended to a date later than February 3, 2014 without the consent of all of the Lenders.

2.2.

Ratable and Non Ratable Advances

.  Each Advance hereunder shall consist of Loans made from the several Lenders ratably based on each Lender’s Percentage, except for Swingline Loans which shall be made by the Swingline Lender in accordance with Section 2.16.  The ratable Advances may be Floating Rate Advances, LIBOR Rate Advances or a combination thereof, selected by the Borrower in accordance with Sections 2.8 and 2.9.

2.3.

Collateral

. The obligations of Borrower under the Loan Documents shall be secured by a perfected first priority security interest to be held by the Administrative Agent for the benefit of the Lenders in the Qualifying Collateral Pool Properties, as described below.  The Mortgages on the initial Qualifying Collateral Pool Properties (or amendments to Mortgages previously recorded pursuant to the Original Credit Agreement) shall be executed and delivered for recordation not later than the Agreement Effective Date. Borrower shall also provide to the Administrative Agent not later than the Agreement Effective Date with respect to each such Qualifying Collateral Pool Property, an Appraisal approved by the Administrative Agent, a rent roll, ARGUS runs, leasing activity reports, tenant sales reports (if applicable), Leases, operating statements, an annual budget or cash flow projection, insuranc e certificates, lender’s title insurance policies (or date down endorsements to the lender’s title insurance policies previously delivered to the Administrative Agent pursuant to the Original Credit Agreement), surveys (which if no material changes to the improvements thereon have occurred, may be older surveys accompanied by an affidavit of no change from the Borrower), flood hazard determinations/flood insurance, subordination, non-disturbance and attornment agreements and estoppel certificates (the “Required SNDAs and Estoppels”) from all tenants of Single Tenant Projects and from those tenants leasing 15,000 or more square feet of gross leaseable area in all other Projects in a form satisfactory to the Administrative Agent (unless previously delivered pursuant to the Original Credit Agreement or waived by the Administrative Agent), environmental assessments satisfactory to the Administrative Agent, property condition reports satisfactory to the Administrative Agent, a written o pinion of the Borrower’s counsel addressed to the Lenders in a form reasonably satisfactory to the Administrative Agent regarding each Mortgage (except those Mortgages delivered pursuant to the Original Credit Agreement with respect to which no opinion will be required at the Agreement Effective Date or at any time thereafter so long as the Administrative Agent previously received a satisfactory opinion that continues to benefit the Administrative Agent and Lenders under this Agreement) and such other due diligence materials as the Administrative Agent shall reasonably require for each

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Qualifying Collateral Pool Property (the “Required Diligence”). Notwithstanding the foregoing, Borrower shall have the right to deliver any such Required SNDAs and Estoppels after the addition of the related Qualifying Collateral Pool Property, so long as any such Required SNDAs and Estoppels shall be delivered to the Administrative Agent (unless the requirement for delivery thereof has been waived by the Administrative Agent) by a date ninety (90) days after the addition of such Qualifying Collateral Pool Property to the Collateral Pool and, if such delivery or waiver has not occurred by such date, then such Qualifying Collateral Pool Property shall be excluded from the Collateral Pool until such delivery is made or waived by the Administrative Agent. Borrower shall pay for all Appraisals of the Qualifying Collateral Pool Properties required hereunder.

(a)

Subsequent Addition of Qualifying Collateral Pool Properties.  If Borrower intends to propose the addition of a Project to the Collateral Pool, whether by acquisition of a new Project or by the retirement of existing Secured Indebtedness thereon or otherwise, then not less than fifteen (15) Business Days prior to the proposed effective date of such addition to the Collateral, Borrower shall notify the Administrative Agent thereof in writing and thereafter provide the Administrative Agent with all Required Diligence with respect to such Project (other than items such as the Mortgage and the Lender’s title insurance policy, which can only be completed or executed once such Project is added to the Collateral Pool), together with a pro forma compliance certificate showing that the addition of such Project to the Collateral Pool will not cause any violations of the covenants hereunder, for distribution to the Lenders.  The approval of the Majority Lenders shall be required for the inclusion of such Project in the Collateral Pool and the Administrative Agent shall promptly request such consent in writing from the Lenders. Notwithstanding the foregoing, if the inclusion of such Project requires a waiver of any of the qualification requirements set out in the definition of Qualifying Collateral Pool Property, such waiver shall require approval of the Required Lenders. Each of the Lenders shall have fifteen (15) Business Days after it receives such request and delivery of the applicable Required Diligence items to notify the Administrative Agent in writing whether it approves or objects to the proposed Qualifying Collateral Pool Property. The Administrative Agent shall notify Borrower in writing not later than twenty (20) Business Days after it has requested such approval from the Lenders if the Majority Lenders have approved the proposed Qualifying Collateral Pool Property.  Once the Administrative Agent notifies Borrower that any Project has been approved to become a Qualifying Collateral Pool Property, then, as a condition precedent to such Project actually becoming a Qualifying Collateral Pool Property and being included in the Collateral Pool, Borrower shall (i) cause the applicable Subsidiary owning such Project to execute and deliver a Joinder Agreement with respect to the Subsidiary Guaranty, if such Subsidiary has not already executed a Subsidiary Guaranty, (ii) cause the remaining items of Required Diligence, including the related Mortgage, to be delivered, executed and recorded, and (iii) execute and deliver to the Administrative Agent on behalf of the Lenders a written confirmation that, as of the date such additional Qualifying Collateral Pool Property is included in the Collateral Pool, all of the representations and warranties contained in Section 5.23 hereof are true and correct in all material respects with respect to such Qualifying Collateral Pool Property as if it were

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one of the initial Qualifying Collateral Pool Properties (collectively, the “Collateral Inclusion Conditions”).

(b)

Sale, Financing or Contribution of a Qualifying Collateral Pool Property.  Provided no Default or Unmatured Default shall have occurred and be continuing (or would exist immediately after giving effect to the transactions contemplated by this Section 2.3(b)), and provided Borrower continues to be in compliance with the covenants set forth in Section 6.21 (iv)-(vi), Borrower or the applicable Subsidiary may sell a Qualifying Collateral Pool Property, create a new Lien securing Indebtedness on a Qualifying Collateral Pool Property or contribute a Qualifying Collateral Pool Property to a joint venture or other entity not wholly-owned by the Consolidated Group (for purposes of this Section, such a sale, creation of a new Lien or contribution shall be referred to as a “Qualifying Collateral Pool Release”) upon the followi ng terms and conditions:

(i)

Borrower shall deliver to the Administrative Agent written notice of the desire to consummate such Qualifying Collateral Pool Release on or before the date that is ten (10) Business Days prior to the date on which the Qualifying Collateral Pool Release is to be effected;

(ii)

Such Qualifying Collateral Pool Release shall require the prior written consent of the Majority Lenders if it involves a Qualifying Collateral Pool Property which contributes $15,000,000 or more to the then-current Collateral Pool Value, provided that no such consent from the Majority Lenders shall be required if such Qualifying Collateral Pool Property is either a Single Tenant Property or the Qualifying Collateral Pool Property commonly known as Southpark Meadows II.

(iii)

Not later than five (5) Business Days prior to the date the Qualifying Collateral Pool Release is to be effected, Borrower shall submit to the Administrative Agent a certificate, which shall be subject to the Administrative Agent’s review and reasonable approval, setting forth the projected Collateral Pool Leverage Ratio and Collateral Pool Debt Service Coverage on a pro forma basis as of the planned effective date of the Qualifying Collateral Pool Release giving effect to:  (A) the Qualifying Collateral Pool Release and (B) any other Projects that will become a Qualifying Collateral Pool Property prior to the date of such Qualifying Collateral Pool Release (the “Pro Forma Calculations”); and

(iv)

If the Pro Forma Calculations show that Borrower will be out of compliance with the covenants contained in Sections 6.21(iv)-(vi) or with any other provisions related to the Collateral Pool, Borrower shall, before the effective date of the Qualifying Collateral Pool Release, either (A) have caused an additional Qualifying Collateral Pool Property to be admitted to the Collateral Pool in accordance with Section 2.3(a) that causes Borrower to be in compliance with the covenants contained in Sections 6.21(iv)-(vi) and with all other provisions related to the Collateral Pool, or (B) pay down the Outstanding Facility

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Amount sufficiently to permit the Borrower to be in compliance with such covenants and provisions.

Upon the occurrence of the Qualifying Collateral Pool Release, the underlying Project shall no longer be a Qualifying Collateral Pool Property, and the Administrative Agent on behalf of the Lenders shall release the Mortgage thereon and execute such other documents or instruments and take all other actions necessary or advisable on behalf of the Lenders to release any related security interests evidenced by the Security Documents.

2.4.

Final Principal Payment

.  Any outstanding Advances and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date.

2.5.

Unused Fee

.  The Borrower agrees to pay to the Administrative Agent for the account of each Lender an unused facility fee (the “Unused Fee”) equal to an aggregate amount computed on a daily basis by multiplying (i) the Unused Fee Percentage applicable to such day, expressed as a per diem rate, times (ii) the excess of the Revolving Commitment over the Outstanding Revolving Amount on such day.  The Unused Fee shall be payable quarterly in arrears on the first Business Day of each calendar quarter (for the prior calendar quarter) and upon any termination of the Revolving Commitment in its entirety.

2.6.

Other Fees

.  The Borrower agrees to pay all fees payable to the Administrative Agent pursuant to the Borrower’s letter agreement with the Administrative Agent dated as of November 17, 2010 (the “Fee Letter”).

2.7.

Minimum Amount of Each Advance

.  Each Advance shall be in the minimum amount of $1,000,000; provided, however, that any Floating Rate Advance may be in the amount of the unused aggregate Revolving Commitments.

2.8.

Principal Payments

.

(a)

Optional.  The Borrower may from time to time pay, without penalty or premium, all or any part of outstanding Floating Rate Advances without prior notice to the Administrative Agent.  A LIBOR Rate Advance may be paid on the last day of the applicable Interest Period or, if and only if the Borrower pays any amounts due to the Lenders under Sections 3.4 and 3.5 as a result of such prepayment, on a day prior to such last day.  Unless otherwise directed by the Borrower by written notice to the Administrative Agent, all principal payments made when no Default has occurred and is continuing shall first be applied to repay all outstanding Revolving Advances and then to repay the Term Advances.  If a Default has occurred and is continuing such principal payment shall be applied on a pro rata basis to all outstanding Advances.

(b)

Mandatory.  Mandatory partial principal payments shall be due from time to time if, (i) due to any reduction in the Collateral Pool Value or in the Adjusted Collateral Pool NOI, whether by a Qualifying Collateral Pool Property failing to continue to satisfy the requirement for qualification as a Qualifying Collateral Pool Property or by a reduction in the Collateral Pool Value or the Adjusted Collateral Pool NOI attributable to any Qualifying Collateral Pool Property, including without limitation any reduction in

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the Appraised Value of any Qualifying Collateral Pool Property, the Outstanding Facility Amount shall be in excess of the maximum amount permitted to be outstanding under clauses (iv) or (v) of Section 6.21 or (ii) without limiting the effect of any other provision of this Agreement requiring such a principal payment, any of the categories of the Obligations described in clauses (i) -(iii) of Section 2.1 shall be in excess of the maximum amount set forth in the applicable clause.  Such principal payments shall be in the amount needed to restore Borrower to compliance with such covenants or such maximum amount.  Such mandatory principal payments shall be due and payable (i) in the case of any such reduction arising from results reported in a quarterly financial statement of Borrower and related compliance certificate, ten ( 10) Business Days after delivery of such quarterly financial statement and compliance certificate under Section 6.1 evidencing such reduction or (ii) in all other cases, ten (10) Business Days after Borrower’s receipt of notice from the Administrative Agent of any such failure to continue to qualify as a Qualifying Collateral Pool Property or any such reduction in the amount contributed to the Adjusted Collateral Pool NOI or Collateral Pool Value or of any such excess over the applicable maximum amount.

2.9.

Method of Selecting Types and Interest Periods for New Advances

.  The Borrower shall select the Type of Advance and, in the case of each LIBOR Rate Advance, the LIBOR Interest Period applicable to each Advance from time to time.  The Borrower shall give the Administrative Agent irrevocable notice (a “Borrowing Notice”) in the form attached as Exhibit G and made a part hereof (i) not later than 1:00 p.m. Cleveland, Ohio time on the Business Day immediately preceding the Borrowing Date of each Floating Rate Advance, (ii) not later than 10:00 a.m. Cleveland, Ohio time, at least three (3) Business Days before the Borrowing Date for each LIBOR Rate Advance and (iii) not later than 10:00 a.m. Cleveland, Ohio time on the same day as the Borrowing Date for each Swingline Advance, which shall specify:

(i)

the Borrowing Date, which shall be a Business Day, of such Advance,

(ii)

the aggregate amount of such Advance,

(iii)

the Type of Advance selected,

(iv)

if such Advance is a Swingline Advance, and Borrower desires to have the One Day LIBOR Rate apply for the duration of such Swingline Advance, a request to that effect; and

(v)

in the case of each LIBOR Rate Advance, the LIBOR Interest Period applicable thereto.

The Administrative Agent shall provide a copy to the Lenders by facsimile of each Borrowing Notice and each Conversion/Continuation Notice not later than the close of business on the Business Day it is received.  Each Lender shall make available its Loan or Loans, in funds immediately available in Cleveland, Ohio to the Administrative Agent at its address

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specified pursuant to Article XIII on each Borrowing Date not later than noon (Cleveland, Ohio time).  The Administrative Agent will make the funds so received from the Lenders available to the Borrower at the Administrative Agent’s aforesaid address.

No LIBOR Interest Period may end after the Facility Termination Date and, unless the Required Lenders otherwise agree in writing, in no event may there be more than seven (7) different LIBOR Interest Periods for LIBOR Rate Advances outstanding at any one time.

2.10.

Conversion and Continuation of Outstanding Advances

.  Floating Rate Advances shall continue as Floating Rate Advances unless and until such Floating Rate Advances are converted into LIBOR Rate Advances.  Each LIBOR Rate Advance shall continue as a LIBOR Rate Advance until the end of the then applicable Interest Period therefore, at which time such LIBOR Rate Advance shall be automatically converted into a Floating Rate Advance unless the Borrower shall have given the Administrative Agent a “Conversion/Continuation Notice” requesting that, at the end of such Interest Period, such LIBOR Rate Advance either continue as a LIBOR Rate Advance for the same or another Interest Period or be converted to an Advance of another Type.  Subject to the terms of Section 2.7, the Borrower may elect from time to time to convert all or any part of an Advance of any Type into any other Type or Types of Advances; provided that any conversion of any LIBOR Rate Advance shall be made on, and only on, the last day of the Interest Period applicable thereto.  The Borrower shall give the Administrative Agent irrevocable notice (a “Conversion/Continuation Notice”) of each conversion of an Advance to a LIBOR Rate Advance or continuation of a LIBOR Rate Advance not later than 10:00 a.m. (Cleveland, Ohio time), at least three Business Days, in the case of a conversion into or continuation of a LIBOR Advance, prior to the date of the requested conversion or continuation, specifying:

(i)

the requested date which shall be a Business Day, of such conversion or continuation;

(ii)

the aggregate amount and Type of the Advance which is to be converted or continued; and

(iii)

the amount and Type(s) of Advance(s) into which such Advance is to be converted or continued and, in the case of a conversion into or continuation of a LIBOR Rate Advance, the duration of the Interest Period applicable thereto.

2.11.

Changes in Interest Rate, Etc.

  Each Floating Rate Advance shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Advance is made or is converted from a LIBOR Rate Advance into a Floating Rate Advance pursuant to Section 2.10 to but excluding the date it becomes due or is converted into a LIBOR Rate Advance pursuant to Section 2.10 hereof, at a rate per annum equal to the Floating Rate for such day.  Changes in the rate of interest on that portion of any Advance maintained as a Floating Rate Advance will take effect simultaneously with each change in the Alternate Base Rate.  Each LIBOR Rate Advance shall bear interest from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBOR Rate Advance.< /P>

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2.12.

Rates Applicable After Default

.  Notwithstanding anything to the contrary contained in Section 2.9 or 2.10, during the continuance of a Default or Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Advance may be made as, converted into or continued as a LIBOR Rate Advance.  During the continuance of a Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that (i) each LIBOR Rate Advance shall bear interest for the remainder of t he applicable Interest Period at the rate otherwise applicable to such Interest Period plus 2% per annum and (ii) each Floating Rate Advance shall bear interest at a rate per annum equal to the Floating Rate otherwise applicable to the Floating Rate Advance plus 2% per annum; provided, however, that the Default Rate shall become applicable automatically if a Default occurs under Section 7.1 or 7.2, unless waived by the Required Lenders.

2.13.

Method of Payment

.

(i)

All payments of the Obligations hereunder shall be made, without setoff, deduction, or counterclaim, in immediately available United States funds to the Administrative Agent on behalf of the Lenders at the Administrative Agent’s address specified pursuant to Article XIII, or at any other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Borrower, by noon (Cleveland time) on the date when due and shall be applied ratably by the Administrative Agent among the Lenders.

(ii)

As provided elsewhere herein, all Lenders’ interests in the Advances and the Loan Documents shall be ratable undivided interests and none of such Lenders’ interests shall have priority over the others.  Each payment delivered to the Administrative Agent for the account of any Lender or amount to be applied or paid by the Administrative Agent to any Lender shall be paid promptly (on the same day as received by the Administrative Agent if received prior to noon (Cleveland time) on such day and otherwise on the next Business Day) by the Administrative Agent to such Lender in the same type of funds that the Administrative Agent received at such Lender’s address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Administrative Agent from such Lender.  Payments received by the Admi nistrative Agent on behalf of the Lenders but not timely funded to the Lenders shall bear interest payable by the Administrative Agent at the Federal Funds Effective Rate from the date due until the date paid.  The Administrative Agent is hereby authorized to charge the account of the Borrower maintained with KeyBank for each payment of principal, interest and fees as it becomes due hereunder.

2.14.

Notes; Telephonic Notices

.  Each Lender is hereby authorized to record the principal amount of each of its Loans and each repayment on the schedule attached to its Note,

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provided, however, that the failure to so record shall not affect the Borrower’s obligations under such Note.  The Borrower hereby authorizes the Lenders and the Administrative Agent on behalf of the Lenders to extend, convert or continue Advances, effect selections of Types of Advances and to transfer funds based on telephonic notices made by any Authorized Officer.  The Borrower agrees to deliver promptly to the Administrative Agent a written confirmation, if such confirmation is requested by the Administrative Agent or any Lender, of each telephonic notice signed by an Authorized Officer.  If the written confirmation differs in any material respect from the action taken by the Administrative Agent and the Lenders, the records of the Administrative Agent and the Lenders shall govern absent manifest error.  The Administrative Agent will at the request of the Borrower, from time to time, but not more often than monthly, provide notice of the amount of the outstanding Aggregate Commitment, the Type of Advance, and the applicable interest rate, if for a LIBOR Rate Advance.  Upon a Lender’s furnishing to Borrower an affidavit to such effect, if a Note is mutilated, destroyed, lost or stolen, Borrower shall deliver to such Lender, in substitution therefore, a new note containing the same terms and conditions as such Note being replaced.

2.15.

Interest Payment Dates; Interest and Fee Basis

.  Interest accrued on each Advance shall be payable on each Payment Date, commencing with the first such date to occur after the date hereof, at maturity, whether by acceleration or otherwise, and upon any termination of the Revolving Commitment in its entirety under Section 2.22 hereof.  Interest, Unused Fees, Facility Letter of Credit Fees and all other fees shall be calculated for actual days elapsed on the basis of a 360-day year.  Interest shall be payable for the day an Advance is made but not for the day of any payment on the amount paid if payment is received prior to noon (Cleveland time) at the place of payment.  If any payment of principal of or interest on an Advance shall become due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and, in the case of a principal payment, such extension of tim e shall be included in computing interest in connection with such payment.

2.16.

Swingline Advances

.  In addition to the other options available to the Borrower hereunder, the Swingline Commitment shall be available for Swingline Advances subject to the following terms and conditions.  Swingline Advances shall be made available for same day borrowings provided that notice is given in accordance with Section 2.9 hereof.  All Swingline Advances shall bear interest at either the Floating Rate or, if Borrower has given written notice to the Administrative Agent as described in Section 2.9 when requesting such Swingline Advance, at the One Day LIBOR Rate, as it may be adjusted over the duration of such Swingline Advance.  In no event shall the Swingline Lender be required to fund a Swingline Advance if it would increase the total aggregate outstanding Loans by Swingline Lender hereunder plus its Percentage of Facility Letter of Credit Obligations to an amount in excess of the Swingline Lender’s Revolving Commitment.  No Swingline Advance may be made to repay a Swingline Advance, but Borrower may repay Swingline Advances from subsequent pro rata Advances hereunder.  On the fifth (5th) Business Day after such a Swingline Advance was made, if such Swingline Advance has not been repaid by the Borrower, each Lender irrevocably agrees to purchase its Percentage of any Swingline Advance made by the Swingline Lender regardless of whether the conditions for disbursement are satisfied at the time of such purchase, including the existence of an Unmatured Default or Default hereunder provided that

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Swingline Lender did not have actual knowledge of such Unmatured Default or Default at the time the Swingline Advance was made and provided further that no Lender shall be required to have total outstanding Revolving Loans plus its Percentage of Facility Letters of Credit exceed its Revolving Commitment.  Such purchase shall take place on the date of the request by Swingline Lender so long as such request is made by noon (Cleveland time), and otherwise on the Business Day following such request.  All requests for purchase shall be in writing.  From and after the date it is so purchased, each such Swingline Advance shall, to the extent purchased, (i) be treated as a Revolving Loan made by the purchasing Lenders and not by the selling Lender for all purposes under this Agreement and the payment of the purchase price by a Lender shall be deemed to be the mak ing of a Revolving Loan by such Lender and shall constitute outstanding principal under such Lender’s Note, and (ii) shall no longer be considered a Swingline Advance except that all interest accruing on or attributable to such Swingline Advance for the period prior to the date of such purchase shall be paid when due by the Borrower to the Administrative Agent for the benefit of the Swingline Lender and all such amounts accruing on or attributable to such Revolving Loans for the period from and after the date of such purchase shall be paid when due by the Borrower to the Administrative Agent for the benefit of the purchasing Lenders.  If prior to purchasing its Percentage of a Swingline Advance one of the events described in Section 7.7 shall have occurred and such event prevents the consummation of the purchase contemplated by preceding provisions, each Lender will purchase an undivided participating interest in the outstanding Swingline Advance in an amount equal to its Percentage of such Swingline Advance.  From and after the date of each Lender’s purchase of its participating interest in a Swingline Advance, if the Swingline Lender receives any payment on account thereof, the Swingline Lender will distribute to such Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s participating interest was outstanding and funded); provided, however, that in the event that such payment was received by the Swingline Lender and is required to be returned to the Borrower, each Lender will return to the Swingline Lender any portion thereof previously distributed by the Swingline Lender to it.  If any Lender fails to so purchase its Percentage of any Swingline Advance, such Lender shall be deemed to be a Defaulting Lender hereunder.

2.17.

Notification of Advances, Interest Rates and Prepayments

.  The Administrative Agent will notify each Lender of the contents of each Borrowing Notice, Conversion/Continuation Notice, and repayment notice received by it hereunder not later than the close of business on the Business Day such notice is received by the Administrative Agent.  The Administrative Agent will notify each Lender of the interest rate applicable to each LIBOR Rate Advance promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate.

2.18.

Lending Installations

.  Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time.  All terms of this Agreement shall apply to any such Lending Installation and the Notes shall be deemed held by each Lender for the benefit of such Lending Installation.  Each Lender may, by written or telex notice to the Administrative Agent and the Borrower, designate a Lending

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Installation through which Loans will be made by it and for whose account Loan payments are to be made.

2.19.

Non-Receipt of Funds by the Administrative Agent

.  Unless the Borrower or a Lender, as the case may be, notifies the Administrative Agent prior to the time at which it is scheduled to make payment to the Administrative Agent on behalf of the Lenders of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Administrative Agent for the account of the Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made.  The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended recipient in reliance upon such assumption.  If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the recipient of such payment shall, on demand by the Administrative Agent, repay to the Ad ministrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to (i) in the case of payment by a Lender, the Federal Funds Effective Rate for such day or (ii) in the case of payment by the Borrower, the interest rate applicable to the relevant Loan.  If such Lender so repays such amount and interest thereon to the Administrative Agent within one Business Day after such demand, all interest accruing on the Loan not funded by such Lender during such period shall be payable to such Lender when received from the Borrower.

2.20.

Replacement of Lenders under Certain Circumstances

.  The Borrower shall be permitted to replace any Lender which (a) is not capable of receiving payments without any deduction or withholding of United States federal income tax pursuant to Section 3.5, or (b) cannot maintain its LIBOR Rate Loans at a suitable Lending Installation pursuant to Section 3.3 or (c) either voted against or failed to respond to any written request made by the Administrative Agent seeking approval of any amendment to or waiver of any provision of this Agreement, if at least the Majority Lenders voted in favor of such proposed amendment or waiver or (d) is a Defaulting Lender; with a replacement bank or other financial institution with a replacement bank or other financial institution, provided that (i) such replacement does not conflict with any applicable legal or regulatory requirements affecting the Lenders, (ii) no Default or (after notice thereof to Borrower) no Unmatured Default  shall have occurred and be continuing at the time of such replacement, (iii) the Borrower shall repay (or the replacement bank or institution shall purchase, at par) all Loans and other amounts owing to such replaced Lender prior to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under Sections 3.4 and 3.6 if any LIBOR Rate Loan owing to such replaced Lender shall be prepaid (or purchased) other than on the last day of the Interest Period relating thereto, (v) the replacement bank or institution, if not already a Lender, and the terms and conditions of such replacement, shall be reasonably satisfactory to the Administrative Agent, (vi) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 12.3 (provided that the Borrower shall be obligated to pay the processing fee referred to therein), (vii) until such time as such replacement shal l be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 3.5 and (viii) any such replacement

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shall not be deemed to be a waiver of any rights which the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.

2.21.

Usury

.  This Agreement and each Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject any Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate.  If by the terms of this Agreement or the Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the interest rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder.  All sums paid or agreed to be paid to Lender for the use , forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

2.22.

Termination or Increase in Revolving Commitment

.  Borrower shall have the right, upon at least three (3) business days notice, to terminate or cancel, in whole or in part, the unused portion of the Revolving Commitments in excess of the Outstanding Revolving Amount, provided that each partial reduction shall be in a minimum amount of $1,000,000 or any whole multiple of $250,000 in excess thereof.  Any partial termination of the Revolving Commitments shall be applied to reduce the Lender’s Revolving Commitments on a pro rata basis.  Once terminated or reduced, the Revolving Commitments may not be reinstated or increased thereafter.  Provided Borrower has not exercised any right to terminate or reduce the  Revolving Commitments, Borrower shall also have the right from time to time, provided no Default or Unmatured Default has occurred and is then continuing, to increase the aggregate Revolving Commitme nts by up to $65,000,000 up to a maximum of $500,000,000 by either adding new lenders as Lenders (subject to the Administrative Agent’s prior written approval of the identity of such new lenders) or obtaining the agreement, which shall be at such Lender’s or Lenders’ sole discretion, of one or more of the then current Lenders to increase its or their Revolving Commitments. In no event will any existing Lender be obligated to provide any portion of any such increase in the Revolving Commitments unless such Lender shall specifically agree in writing to provide an increase in its Revolving Commitment at such time.  On the effective date of any such increase, Borrower shall pay to the Administrative Agent any amounts due to it under the Fee Letter and to each new lender or then-current Lender providing such additional Revolving Commitment the up-front fee agreed to between Borrower and such party.  Such increases shall be evidenced by the execution and delivery of an Amendment Regarding Increase in the form of Exhibit C attached hereto by Borrower, the Administrative Agent and the new lender or existing Lender providing such additional Revolving Commitment, a copy of which shall be forwarded to each Lender by the Administrative Agent promptly after execution thereof. In addition, the Mortgages shall be amended to reflect such increase and the Subsidiary Guarantors shall execute a consent to such increase ratifying and continuing their obligations

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under the Subsidiary Guaranty. On the effective date of each such increase in the aggregate Revolving Commitments, Borrower and the Administrative Agent shall cause the new or existing Lenders providing such increase to hold its or their Percentage of all Revolving Advances outstanding at the close of business on such day, by funding more than its or their Percentage of new Revolving Advances made on such date or by purchasing shares of outstanding Revolving Loans held by the other Lenders or by a combination thereof.  The Lenders agree to cooperate in any required sale and purchase of outstanding Revolving Advances to achieve such result.  In no event shall the aggregate  Revolving Commitments exceed $500,000,000 without the approval of all of the Lenders.

ARTICLE IIA
LETTER OF CREDIT SUBFACILITY

2A.1

Obligation to Issue

.  Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Borrower herein set forth, the Issuing Bank hereby agrees to issue for the account of the Borrower, one or more Facility Letters of Credit in accordance with this Article IIA, from time to time during the period commencing on the Agreement Effective Date and ending on a date sixty (60) days prior to the Facility Termination Date.

2A.2

Types and Amounts

. The Issuing Bank shall not have any obligation to:

(i)

issue any Facility Letter of Credit if the aggregate maximum amount then available for drawing under Letters of Credit issued by such Issuing Bank, after giving effect to the Facility Letter of Credit requested hereunder, shall exceed any limit imposed by law or regulation upon such Issuing Bank;

(ii)

issue any Facility Letter of Credit if, after giving effect thereto, (1) the then applicable Outstanding Facility Amount would exceed the then current Aggregate Commitment or (2) the then-applicable Outstanding Revolving Amount would exceed the then-current aggregate Revolving Commitments or (3) the Facility Letter of Credit Obligations would exceed the Facility Letter of Credit Sublimit; or

(iii)

issue any Facility Letter of Credit having an expiration date, or containing automatic extension provisions to extend such date, to a date beyond the sixtieth (60th) day prior to the Facility Termination Date, provided that, if Borrower then has an unexpired option to extend the Facility Termination Date under Section 2.1, Borrower may request an expiration date during such extension so long as Borrower specifically acknowledges that it shall deposit the full undrawn amount of any such Facility Letter of Credit into the Letter of Credit Collateral Account on or before the then-current Facility Termination Date, if any such extension is not exercised or is not exercisable.

2A.3

Conditions

.  In addition to being subject to the satisfaction of the conditions contained in Article IV hereof and in the balance of this Article IIA, the obligation of the Issuing

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Bank to issue any Facility Letter of Credit is subject to the satisfaction in full of the following conditions:

(i)

the Borrower shall have delivered to the Issuing Bank at such times and in such manner as the Issuing Bank may reasonably prescribe such documents and materials as may be reasonably required pursuant to the terms of the proposed Facility Letter of Credit (it being understood that if any inconsistency exists between such documents and the Loan Documents, the terms of the Loan Documents shall control) and the proposed Facility Letter of Credit shall be reasonably satisfactory to the Issuing Bank as to form and content;

(ii)

as of the date of issuance, no order, judgment or decree of any court, arbitrator or governmental authority shall purport by its terms to enjoin or restrain the Issuing Bank from issuing the requested Facility Letter of Credit and no law, rule or regulation applicable to the Issuing Bank and no request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Issuing Bank shall prohibit or request that the Issuing Bank refrain from the issuance of Letters of Credit generally or the issuance of the requested Facility Letter or Credit in particular; and

(iii)

there shall not exist any Default or Unmatured Default.

2A.4

Procedure for Issuance of Facility Letters of Credit

.

(a)

Borrower shall give the Issuing Bank and the Administrative Agent at least three (3) Business Days’ prior written notice of any requested issuance of a Facility Letter of Credit under this Agreement (a “Letter of Credit Request”), such notice shall be irrevocable, except as provided in Section 2A.4(b)(i) below, and shall specify:

(i)

the stated amount of the Facility Letter of Credit requested (which stated amount shall not be less than $50,000);

(ii)

the effective date (which day shall be a Business Day) of issuance of such requested Facility Letter of Credit (the “Issuance Date”);

(iii)

the date on which such requested Facility Letter of Credit is to expire (which day shall be a Business Day which is not less than sixty (60) days prior to the Facility Termination Date);

(iv)

the purpose for which such Facility Letter of Credit is to be issued;

(v)

the Person for whose benefit the requested Facility Letter of Credit is to be issued; and

(vi)

any special language required to be included in the Facility Letter of Credit.

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At the time such request is made, the Borrower shall also provide the Administrative Agent and the Issuing Bank with a copy of the form of the Facility Letter of Credit that the Borrower is requesting be issued and shall execute and deliver the Issuing Bank’s customary letter of credit application and reimbursement agreement with respect thereto.  Such notice, to be effective, must be received by such Issuing Bank and the Administrative Agent not later than noon (Cleveland time) on the last Business Day on which notice can be given under this Section 2A.4(a).  Administrative Agent shall, promptly upon request by a Lender, provide a copy of such Letter of Credit Request to such Lender.

(b)

Subject to the terms and conditions of this Article IIA and provided that the applicable conditions set forth in Article IV hereof have been satisfied, the Issuing Bank shall, on the Issuance Date, issue a Facility Letter of Credit on behalf of the Borrower in accordance with the Letter of Credit Request and the Issuing Bank’s usual and customary business practices unless the Issuing Bank has actually received (i) written notice from the Borrower specifically revoking the Letter of Credit Request with respect to such Facility Letter of Credit given not later than the Business Day immediately preceding the Issuance Date, or (ii) written or telephonic notice from the Administrative Agent stating that the issuance of such Facility Letter of Credit would violate Section 2A.2.

(c)

The Issuing Bank shall give the Administrative Agent (who shall promptly notify Lenders) and the Borrower written or telex notice, or telephonic notice confirmed promptly thereafter in writing, of the issuance of a Facility Letter of Credit (the “Issuance Notice”).

(d)

The Issuing Bank shall not extend or amend any Facility Letter of Credit unless the requirements of this Section 2A.4 are met as though a new Facility Letter of Credit was being requested and issued.

2A.5

Reimbursement Obligations; Duties of Issuing Bank

.

(a)

The Issuing Bank shall promptly notify the Borrower and the Administrative Agent (who shall promptly notify Lenders) of any draw under a Facility Letter of Credit.  Any such draw shall not be deemed to be a default hereunder but shall constitute a  Revolving Advance of the Facility in the amount of the Reimbursement Obligation with respect to such Facility Letter of Credit and shall bear interest from the date of the relevant drawing(s) under the pertinent Facility Letter of Credit at the Floating Rate Advance; provided that if a Default or an Unmatured Default exists at the time of any such drawing(s), then the Borrower shall reimburse the Issuing Bank for drawings under a Facility Letter of Credit issued by the Issuing Bank no later than the next succeeding Business Day after the payment by the Issuing Bank and until repaid such Reimbursement Obligation shall bear i nterest at the Default Rate.

(b)

Any action taken or omitted to be taken by the Issuing Bank under or in connection with any Facility Letter of Credit, if taken or omitted in the absence of willful misconduct or gross negligence, shall not put the Issuing Bank under any resulting liability to any Lender or, provided that such Issuing Bank has complied with the procedures specified in Section 2A.4, relieve any Lender of its obligations hereunder to the Issuing Bank. In determining whether to pay under any Facility Letter of Credit, the Issuing Bank shall have no obligation

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relative to the Lenders other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered in compliance, and that they appear to comply on their face, with the requirements of such Letter of Credit.

2A.6

Participation

.

(a)

Immediately upon issuance by the Issuing Bank of any Facility Letter of Credit in accordance with the procedures set forth in this Article IIA, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the Issuing Bank, without recourse, representation or warranty, an undivided interest and participation equal to such Lender’s Percentage in such Facility Letter of Credit (including, without limitation, all obligations of the Borrower with respect thereto) and all related rights hereunder.  Each Lender’s obligation to make further Loans to Borrower (other than any payments such Lender is required to make under subparagraph (b) below) or to purchase an interest from the Issuing Bank in any subsequent Facility Letters of Credit issued by the Issuing Bank on behalf of Borrower shall be reduced by such Lender’s Percent age of the undrawn portion of each Facility Letter of Credit outstanding.

(b)

In the event that the Issuing Bank makes any payment under any Facility Letter of Credit and the Borrower shall not have repaid such amount to the Issuing Bank pursuant to Section 2A.7 hereof, the Issuing Bank shall promptly notify the Administrative Agent, which shall promptly notify each Lender of such failure, and each Lender shall promptly and unconditionally pay to the Administrative Agent for the account of the Issuing Bank the amount of such Lender’s Percentage of the unreimbursed amount of such payment, and the Administrative Agent shall promptly pay such amount to the Issuing Bank.  Lender’s payments of its Percentage of such Reimbursement Obligation as aforesaid shall be deemed to be a Revolving Loan by such Lender and shall constitute outstanding principal under such Lender’s Note.  The failure of any Lender to make available to the Ad ministrative Agent for the account of the Issuing Bank its Percentage of the unreimbursed amount of any such payment shall not relieve any other Lender of its obligation hereunder to make available to the Administrative Agent for the account of such Issuing Bank its Percentage of the unreimbursed amount of any payment on the date such payment is to be made, but no Lender shall be responsible for the failure of any other Lender to make available to the Administrative Agent its Percentage of the unreimbursed amount of any payment on the date such payment is to be made.  Any Lender which fails to make any payment required pursuant to this Section A.6(b) shall be deemed to be a Defaulting Lender hereunder.

(c)

Whenever the Issuing Bank receives a payment on account of a Reimbursement Obligation, including any interest thereon, the Issuing Bank shall promptly pay to the Administrative Agent on behalf of the Lenders and the Administrative Agent shall promptly (on the same day as received by the Administrative Agent if received prior to noon (Cleveland time) on such day and otherwise on the next Business Day) pay to each Lender which has funded its participating interest therein, in immediately available funds, an amount equal to such Lender’s Percentage thereof.

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(d)

Upon the request of the Administrative Agent or any Lender, the Issuing Bank shall furnish to such Administrative Agent or Lender copies of any Facility Letter of Credit to which the Issuing Bank is party and such other documentation as may reasonably be requested by the Administrative Agent or Lender.

(e)

The obligations of a Lender to make payments to the Administrative Agent for the account of the Issuing Bank with respect to a Facility Letter of Credit shall be absolute, unconditional and irrevocable, not subject to any counterclaim, set off, qualification or exception whatsoever other than a failure of any such Issuing Bank to comply with the terms of this Agreement relating to the issuance of such Facility Letter of Credit, and such payments shall be made in accordance with the terms and conditions of this Agreement under all circumstances.

2A.7

Payment of Reimbursement Obligations

.

(a)

The Borrower agrees to pay to the Administrative Agent for the account of the Issuing Bank the amount of all Advances for Reimbursement Obligations, interest and other amounts payable to the Issuing Bank under or in connection with any Facility Letter of Credit when due, irrespective of any claim, set off, defense or other right which the Borrower may have at any time against any Issuing Bank or any other Person, under all circumstances, including without limitation any of the following circumstances:

(i)

any lack of validity or enforceability of this Agreement or any of the other Loan Documents;

(ii)

the existence of any claim, setoff, defense or other right which the Borrower may have at any time against a beneficiary named in a Facility Letter of Credit or any transferee of any Facility Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, the Issuing Bank, any Lender, or any other Person, whether in connection with this Agreement, any Facility Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transactions between the Borrower and the beneficiary named in any Facility Letter of Credit);

(iii)

any draft, certificate or any other document presented under the Facility Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect of any statement therein being untrue or inaccurate in any respect;

(iv)

the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; or

(v)

the occurrence of any Default or Unmatured Default.

(b)

In the event any payment by the Borrower received by the Issuing Bank or the Administrative Agent with respect to a Facility Letter of Credit and distributed by the Administrative Agent to the Lenders on account of their participations is thereafter set aside, avoided or recovered from the Administrative Agent or Issuing Bank in connection with any

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receivership, liquidation, reorganization or bankruptcy proceeding, each Lender which received such distribution shall, upon demand by the Administrative Agent, contribute such Lender’s Percentage of the amount set aside, avoided or recovered together with interest at the rate required to be paid by the Issuing Bank or the Administrative Agent upon the amount required to be repaid by the Issuing Bank or the Administrative Agent.

2A.8

Compensation for Facility Letters of Credit

.

(c)

The Borrower shall pay to the Administrative Agent, for the ratable account of the Lenders (including the Issuing Bank), based upon the Lenders’ respective Percentages, a per annum fee (the “Facility Letter of Credit Fee”) as a percentage of the face amount of each Facility Letter of Credit outstanding equal to the LIBOR Applicable Margin in effect from time to time hereunder while such Facility Letter of Credit is outstanding.  The Facility Letter of Credit Fee relating to any Facility Letter of Credit shall accrue on a daily basis and shall be due and payable in arrears on the first Business Day of each calendar quarter following the issuance of such Facility Letter of Credit and, to the extent any such fees are then due and unpaid, on the Facility Termination Date or any other earlier date that the Obligations are due and payable in full.  The Administrative Agent shall promptly (on the same day as received by the Administrative Agent if received prior to noon (Cleveland time) on such day and otherwise on the next Business Day)  remit such Facility Letter of Credit Fees, when paid, to the other Lenders in accordance with their Percentages thereof.  The Borrower shall not have any liability to any Lender for the failure of the Administrative Agent to promptly deliver funds to any such Lender and shall be deemed to have made all such payments on the date the respective payment is made by the Borrower to the Administrative Agent, provided such payment is received by the time specified in Section 2.13 hereof.

(d)

The Issuing Bank also shall have the right to receive solely for its own account an issuance fee equal to the greater of (A) $1,500 or (B) one eighth of one percent (0.125%) per annum to be calculated on the face amount of each Facility Letter of Credit for the stated duration thereof, based on the actual number of days and using a 360-day year basis.  The issuance fee shall be payable by the Borrower on the Issuance Date for each such Facility Letter of Credit and on the date of any increase therein or extension thereof.  The Issuing Bank shall also be entitled to receive its reasonable out of pocket costs and the Issuing Bank’s standard charges of issuing, amending and servicing Facility Letters of Credit and processing draws thereunder.

2A.9

Letter of Credit Collateral Account

.  The Borrower hereby agrees that it will immediately upon the request of the Administrative Agent or prior to the Facility Termination Date if a Facility Letter of Credit is outstanding and unexpired on such date as provided in Section 2A.2(iii) above, establish a special collateral account (the “Letter of Credit Collateral Account”) at the Administrative Agent’s office at the address specified pursuant to Article XIII, in the name of the Borrower but under the sole dominion and control of the Administrative Agent, for the benefit of the Lenders, and in which the Borrower shall have no interest other than as set forth in Section 8.1.  The Letter of Credit Collateral Account shall hold the deposits the Borrower is required to make upon the Facility Termination Date related to any outstanding and unexpired Facility Letter of Credit or after a Default on account of any outstanding Facility Letters of Credit

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as described in Section 8.1.  In addition to the foregoing, the Borrower hereby grants to the Administrative Agent, for the benefit of the Lenders, a security interest in and to the Letter of Credit Collateral Account and any funds that may hereafter be on deposit in such account, including income earned thereon.  The Lenders acknowledge and agree that the Borrower has no obligation to fund the Letter of Credit Collateral Account unless and until so required under Section 2A.2(iii) or Section 8.1 hereof.

ARTICLE III.
CHANGE IN CIRCUMSTANCES

3.1.

Yield Protection

.  If, on or after the date of this Agreement, the adoption of any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive (whether or not having the force of law), or any change in the interpretation or administration thereof by any governmental or quasi-governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or applicable Lending Installation with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:

(i)

subjects any Lender or any applicable Lending Installation to any Taxes, or changes the basis of taxation of payments (other than with respect to Excluded Taxes) to any Lender in respect of its LIBOR Rate Loans, or

(ii)

imposes or increases or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or any applicable Lending Installation (other than reserves and assessments taken into account in determining the interest rate applicable to LIBOR Rate Advances), or

(iii)

imposes any other condition the result of which is to increase the cost to any Lender or any applicable Lending Installation of making, funding or maintaining its LIBOR Rate Loans, or reduces any amount receivable by any Lender or any applicable Lending Installation in connection with its LIBOR Rate Loans, or requires any Lender or any applicable Lending Installation to make any payment calculated by reference to the amount of LIBOR Rate Loans, by an amount deemed material by such Lender  as the case may be,

and the result of any of the foregoing is to increase the cost to such Lender or applicable Lending Installation, as the case may be, of making or maintaining its LIBOR Rate Loans or Revolving Commitment or to reduce the return received by such Lender or applicable Lending Installation in connection with such LIBOR Rate Loans or Revolving Commitment, then, within 15 days of a demand by such Lender accompanied by reasonable evidence of the occurrence of the applicable event under clauses (i), (ii) or (iii) above, the Borrower shall pay such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction in amount received.

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3.2.

Changes in Capital Adequacy Regulations

.  If a Lender in good faith determines the amount of capital required or expected to be maintained by such Lender, any Lending Installation of such Lender or any corporation controlling such Lender  is increased as a result of a Change (as hereinafter defined), then, within 15 days of demand by such Lender, the Borrower shall pay such Lender the amount necessary to compensate for any shortfall in the rate of return on the portion of such increased capital which such Lender in good faith determines is attributable to this Agreement, its outstanding credit exposure hereunder or its obligation to make Loans hereunder (after taking into account such Lender’s policies as to capital adequacy).  “Change” means (i) any change after the date of this Agreement in the Risk Based Capital Guidelines (as hereinafter defined) or (ii) any adoption of or change i n any other law, governmental or quasi governmental rule, regulation, policy, guideline, interpretation, or directive (whether or not having the force of law) after the date of this Agreement which affects the amount of capital required or expected to be maintained by any Lender or any Lending Installation or any corporation controlling any Lender.    Notwithstanding anything herein to the contrary, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines and directives promulgated thereunder shall be deemed to be a “Change” under this Section 3.2 and shall qualify as a change under Section 3.1 above, regardless of the date enacted or adopted.  “Risk-Based Capital Guidelines” means (i) the risk-based capital guidelines in effect in the United States on the date of this Agreement, including transition rules, and (ii) the corresponding capital regulations promulgated by regulatory authorities outside the Un ited States implementing the June 2006 report of the Basel Committee on Banking Regulation and Supervisory Practices Entitled “Basel II: International Convergence of Capital Measurements and Capital Standards:  A Revised Framework,” including transition rules, and any amendments to such regulations adopted prior to the date of this Agreement.

3.3.

Availability of Types of Advances

.  If any Lender in good faith determines that maintenance of any of its LIBOR Rate Loans at a suitable Lending Installation would violate any applicable law, rule, regulation or directive, whether or not having the force of law, the Administrative Agent shall, with written notice to Borrower, suspend the availability of LIBOR Rate Advances and require any LIBOR Rate Advances to be repaid; or if the Required Lenders in good faith determine that (i) deposits of a type or maturity appropriate to match fund LIBOR Rate Advances are not available, the Administrative Agent shall, with written notice to Borrower, suspend the availability of LIBOR Rate Advances with respect to any LIBOR Rate Advances made after the date of any such determination, or (ii) an interest rate applicable to a LIBOR Rate Advance does not accurately reflect the cost of making such a LIBOR Rate Advance, then, if for any reason whatsoever the provisions of Section 3.1 are inapplicable, the Administrative Agent shall, with written notice to Borrower, suspend the availability of any LIBOR Rate Advances made after the date of any such determination.  If the Borrower is required to so repay a LIBOR Rate Advance, the Borrower may concurrently with such repayment borrow from the Lenders, in the amount of such repayment, a Loan bearing interest at the Floating Rate.

3.4.

Funding Indemnification

.  If any payment of a LIBOR Rate Advance occurs on a date which is not the last day of the applicable Interest Period, whether because of acceleration, prepayment or otherwise, or a LIBOR Rate Advance is not made on the date specified by the Borrower for any reason other than default by the Lenders or as a result of unavailability

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pursuant to Section 3.3, the Borrower will indemnify each Lender for any loss or cost incurred by it resulting therefrom, including, without limitation, any loss or cost (incurred or expected to be incurred) in liquidating or employing deposits acquired to fund or maintain the LIBOR Rate Advance and shall pay all such losses or costs within fifteen (15) days after written demand therefor.

3.5.

Taxes

.

(i)

All payments by the Borrower to or for the account of any Lender or the Administrative Agent on behalf of the Lenders hereunder or under any Note shall be made free and clear of and without deduction for any and all Taxes.  If the Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder to any Lender or the Administrative Agent on behalf of the Lenders, (a) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.5) such Lender or the Administrative Agent on behalf of the Lenders (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (b) the Borrower shall make such deductions, (c) the Borrower shall pay the full amount deducted t o the relevant authority in accordance with applicable law and (d) the Borrower shall furnish to the Administrative Agent the original copy of a receipt evidencing payment thereof within 30 days after such payment is made.

(ii)

In addition, the Borrower hereby agrees to pay any present or future stamp or documentary taxes and any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note (“Other Taxes”).

(iii)

The Borrower hereby agrees to indemnify the Administrative Agent and each Lender for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by the Administrative Agent on behalf of the Lenders or such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto.  Payments due under this indemnification shall be made within 30 days of the date the Administrative Agent or such Lender makes demand therefore pursuant to Section 3.6.

(iv)

Each Lender that is not incorporated under the laws of the United States of America or a state thereof (each a “Non-U.S. Lender”) agrees that it will, not more than ten Business Days after the date it becomes a party to this Agreement, (i) deliver to the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, certifying in either case that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, and (ii) deliver to the Borrower and the Administrative

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Agent a United States Internal Revenue Form W-8 or W-9, as the case may be, and certify that it is entitled to an exemption from United States backup withholding tax.  Each Non-U.S. Lender further undertakes to deliver to the Borrower and the Administrative Agent (x) renewals or additional copies of such form (or any successor form) on or before the date that such form expires or becomes obsolete, and (y) after the occurrence of any event requiring a change in the most recent forms so delivered by it, such additional forms or amendments thereto as may be reasonably requested by the Borrower or the Administrative Agent.  All forms or amendments described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unles s an event (including without limitation any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Administrative Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.

(v)

For any period during which a Non-U.S. Lender has failed to provide the Borrower with an appropriate form pursuant to clause (iv), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any governmental authority, occurring subsequent to the date on which a form originally was required to be provided), such Non-U.S. Lender shall not be entitled to indemnification under this Section 3.5 with respect to Taxes imposed by the United States.

(vi)

Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate following receipt of such documentation.

(vii)

If the U.S. Internal Revenue Service or any other governmental authority of the United States or any other country or any political subdivision thereof asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate form was not delivered or properly completed, because such Lender failed to notify the Administrative Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction

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on amounts payable to the Administrative Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for the Administrative Agent, which attorneys may be employees of the Administrative Agent).  The obligations of the Lenders under this Section 3.5(vii) shall survive the payment of the Obligations and termination of this Agreement and any such Lender obligated to indemnify the Administrative Agent shall not be entitled to indemnification from the Borrower with respect to such amounts, whether pursuant to this Article or otherwise, except to the extent the Borrower participated in the actions giving rise to such liability.

3.6.

Lender Statements; Survival of Indemnity

.  To the extent reasonably possible, each Lender shall designate an alternate Lending Installation with respect to its LIBOR Rate Loans to reduce any liability of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid the unavailability of LIBOR Rate Advances under Section 3.3, so long as such designation is not, in the reasonable judgment of such Lender, disadvantageous to such Lender.  Each Lender shall deliver a written statement of such Lender to the Borrower (with a copy to the Administrative Agent) as to the amount due, if any, under Sections 3.1, 3.2, 3.4 or 3.5.  Such written statement shall set forth in reasonable detail the calculations upon which such Lender determined such amount and shall be final, conclusive and binding on the Borrower in the absence of manifest error.  Determi nation of amounts payable under such Sections in connection with a LIBOR Rate Loan shall be calculated as though each Lender funded its LIBOR Rate Loan through the purchase of a deposit of the type and maturity corresponding to the deposit used as a reference in determining the LIBOR Rate applicable to such Loan, whether in fact that is the case or not.  Unless otherwise provided herein, the amount specified in the written statement of any Lender shall be payable on demand after receipt by the Borrower of such written statement.  The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the Obligations and termination of this Agreement.

ARTICLE IV.
CONDITIONS PRECEDENT

4.1.

Initial Advance

.  The Lenders shall not be required to make the initial Advance hereunder or issue the initial Facility Letter of Credit hereunder, unless (a) the Borrower shall, prior to or concurrently with such initial Advance or issuance, have paid all fees due and payable to the Lenders and the Administrative Agent hereunder, and (b) the Borrower shall have furnished to the Administrative Agent, the following:

(a)

The duly executed originals of the Loan Documents, including the Notes payable to the order of each of the Lenders, this Agreement, the Disclosure Letter, the Subsidiary Guaranty and the Mortgages;

(b)

(i) Certificates of good standing for the Borrower and each Subsidiary Guarantor, from the State of Maryland for the Borrower and the states of organization of each Subsidiary Guarantor, certified by the appropriate governmental officer and dated not more than sixty (60) days prior to the Agreement Effective Date, and (ii) foreign qualification certificates for each Subsidiary Guarantor owning a Qualifying Collateral

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Pool Property, certified by the appropriate governmental officer and dated not more than sixty (60) days prior to the Agreement Effective Date, for the jurisdiction in which such Qualifying Collateral Pool Property is located;

(c)

Copies of the formation documents (including code of regulations, if appropriate) of the Borrower and the Subsidiary Guarantors, certified by an officer of the Borrower or such Subsidiary Guarantor, as appropriate, together with all amendments thereto;

(d)

Incumbency certificates, executed by officers of the Borrower or the Subsidiary Guarantors, which shall identify by name and title and bear the signature of the Persons authorized to sign the Loan Documents and to make borrowings hereunder on behalf of the Borrower, upon which certificate the Administrative Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower or any such Subsidiary Guarantor;

(e)

Copies, certified by a Secretary or an Assistant Secretary of the Borrower or the applicable Subsidiary Guarantor, of the Board of Directors’ resolutions authorizing the Advances provided for herein, with respect to the Borrower, and the execution, delivery and performance of the Loan Documents to be executed and delivered by the Borrower and each Subsidiary Guarantor hereunder;

(f)

A written opinion of the Borrower’s counsel, addressed to the Lenders in substantially the form of Exhibit F hereto or such other form as the Administrative Agent may reasonably approve;

(g)

A certificate, signed by an officer of the Borrower, stating that on the initial Borrowing Date (i) no Default or Unmatured Default has occurred and is continuing, (ii) all representations and warranties of the Borrower are true and correct, (iii) neither Borrower nor any Subsidiary Guarantor has suffered any material adverse changes, and (iv) except as specifically as disclosed in the Disclosure Letter, no action, suit, investigation or proceeding, pending or threatened, exists in any court or before any arbitrator or governmental authority that purports to materially and adversely affect the Borrower, Guarantors or subsidiary or any transaction contemplated hereby, or that could have a material adverse effect on the Borrower, Subsidiary Guarantors or subsidiary or any transaction contemplated hereby or on the ability of the Borrower, Subsidiary Guarant ors or subsidiary of either one to perform its obligations under the Loan Documents, provided that such certificate is in fact true and correct;

(h)

The most recent financial statements of the Borrower;

(i)

UCC financing statement searches with respect to the Borrower and each Subsidiary Guarantor from its state of organization;

(j)

Written money transfer instructions addressed to the Administrative Agent and signed by an Authorized Officer, together with such other related money transfer authorizations as the Administrative Agent may have reasonably requested;

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(k)

Evidence that all upfront fees due to each of the Lenders under the terms of their respective commitment letters have been paid, or will be paid out of the proceeds of the initial Advance hereunder;

(l)

A pro forma compliance certificate pursuant to Section 6.1(v), (and provided for clarification purposes that Borrower shall have no obligation to deliver a compliance certificate under the terms of the Original Credit Agreement with respect to the quarter ended December 31, 2010, but that if such pro forma compliance certificate does not reflect Borrower’s actual financial results reported for the period ending December 31, 2010,  Borrower shall be obligated to issue another compliance certificate under the terms of this Agreement for such period when such actual results are reported);

(m)

The Required Diligence with respect to all Qualifying Collateral Pool Properties (other than the Required SNDAs and Estoppels, but including the opinions of local counsel with respect to the Mortgages);

(n)

Evidence in the form of an escrow and related undertakings from a title insurance company satisfactory to the Administrative Agent that all Indebtedness encumbering the Qualifying Collateral Pool Properties immediately prior to the Agreement Effective Date shall be repaid in full from the proceeds of the initial Advance hereunder.

(o)

Evidence satisfactory to the Administrative Agent of payment in full of all amounts due to any lenders under the Original Credit Agreement which are not continuing as Lenders hereunder; and

(p)

Such other documents as any Lender or its counsel may have reasonably requested, the form and substance of which documents shall be reasonably acceptable to the parties and their respective counsel.

Upon satisfaction of the foregoing conditions precedent and the funding of the initial Advance, the Administrative Agent shall execute and deliver to Borrower a release of any security interests created pursuant to the “Collateral Assignments” or the “Account Pledge Agreement” (as such terms are defined in the Original Credit Agreement) and terminations of any related UCC financing statements.

4.2.

Each Advance and Issuance

.  The Lenders shall not be required to make any Advance or issue any Facility Letter of Credit unless on the applicable Borrowing Date:

(i)

There exists no Default or Unmatured Default;

(ii)

The representations and warranties contained in Article V are true and correct as of such Borrowing Date with respect to Borrower, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall be true and correct on and as of such earlier date; and

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(iii)

All documents incident to the making of such Advance or issuance of such Facility Letter of Credit shall be satisfactory to the Administrative Agent and its counsel.

Each Borrowing Notice and each Letter of Credit Request with respect to each such Advance shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been satisfied.  Any Lender may require a duly completed Compliance Certificate in substantially the same form of the Certificate attached as Exhibit D.

ARTICLE V.
REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

5.1.

Existence

.  The Borrower is a corporation duly organized and validly existing under the laws of the State of Maryland.  The Borrower has its principal place of business in Oak Brook, Illinois and is duly qualified as a foreign entity, properly licensed (if required), in good standing and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where the failure to be so qualified, licensed and in good standing and to have the requisite authority would not have a Material Adverse Effect.  Each of Borrower’s Subsidiaries is duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted.

5.2.

Authorization and Validity

.  The Borrower has the corporate power and authority and legal right to execute and deliver the Loan Documents and to perform its obligations thereunder.  The execution and delivery by the Borrower of the Loan Documents and the performance of its obligations thereunder have been duly authorized by proper corporate proceedings, and the Loan Documents constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally.

5.3.

No Conflict; Government Consent

.  Neither the execution and delivery by the Borrower of the Loan Documents, nor the consummation of the transactions therein contemplated, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Borrower or any of its Subsidiaries or the Borrower’s or any Subsidiary’s articles of incorporation, by-laws, articles of organization, articles of formation, certificates of trust, limited partnership certificates, operating agreements, trust agreements, or limited partnership agreements, or the provisions of any indenture, instrument or agreement to which the Borrower or any of its Subsidiaries is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, except where such violation, conflict or default would not have a Mate rial Adverse Effect, or result in the creation or imposition of any Lien in, of or on the Property of the Borrower or a Subsidiary pursuant to the terms of any such indenture, instrument or agreement.  No

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order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, any of the Loan Documents other than the filing of a copy of this Agreement.

5.4.

Financial Statements; Material Adverse Effect

.  All consolidated financial statements of the Borrower and its Subsidiaries heretofore or hereafter delivered to the Lenders were prepared in accordance with GAAP in effect on the preparation date of such statements and fairly present in all material respects the consolidated financial condition and operations of the Borrower and its Subsidiaries at such date and the consolidated results of their operations for the period then ended, subject, in the case of interim financial statements, to normal and customary year-end adjustments.  From the preparation date of the most recent financial statements delivered to the Lenders through the Agreement Effective Date, there was no change in the business, properties, or condition (financial or otherwise) of the Borrower and its Subsidiaries which could reasonably be expected to have a Material Adverse Effect.

5.5.

Taxes

.  The Borrower and its Subsidiaries have filed all United States federal tax returns and all other tax returns which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided.  No tax liens have been filed and no claims are being asserted with respect to such taxes.  The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of any taxes or other governmental charges are adequate.

5.6.

Litigation and Guarantee Obligations

.  Except as set forth in the Disclosure Letter or as set forth in written notice to the Administrative Agent from time to time, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of any of their officers, threatened against or affecting the Borrower or any of its Subsidiaries which could reasonably be expected to have a Material Adverse Effect.  The Borrower has no material contingent obligations not provided for or disclosed in the financial statements referred to in Section 6.1 or as set forth in written notices to the Administrative Agent given from time to time after the Agreement Effective Date on or about the date such material contingent obligations are incurred.

5.7.

Subsidiaries

.  All of the issued and outstanding shares of capital stock of any Subsidiaries that are corporations have been duly authorized and issued and are fully paid and non-assessable.

5.8.

ERISA

.  The Unfunded Liabilities of all Single Employer Plans do not in the aggregate exceed $1,000,000.  Neither Borrower nor any other member of the Controlled Group has incurred, or is reasonably expected to incur, any withdrawal liability to Multiemployer Plans in excess of $250,000 in the aggregate.  Each Plan complies in all material respects with all applicable requirements of law and regulations, no Reportable Event has occurred with respect to any Plan, neither Borrower nor any other members of the Controlled Group has withdrawn

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from any Plan or initiated steps to do so, and no steps have been taken to reorganize or terminate any Plan.

5.9.

Accuracy of Information

.  No information, exhibit or report furnished by the Borrower or any of its Subsidiaries to the Administrative Agent or to any Lender in connection with the negotiation of, or compliance with, the Loan Documents contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not misleading.

5.10.

Regulation U

.  The Borrower has not used the proceeds of any Advance to buy or carry any margin stock (as defined in Regulation U) in violation of the terms of this Agreement.

5.11.

Material Agreements

.  Neither the Borrower nor any Subsidiary is a party to any agreement or instrument or subject to any charter or other corporate restriction which could reasonably be expected to have a Material Adverse Effect.  Neither Borrower nor any Subsidiary is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in (i) any agreement to which it is a party, which default could have a Material Adverse Effect, or (ii) any agreement or instrument evidencing or governing Indebtedness, which default would constitute a Default hereunder.

5.12.

Compliance With Laws

.  The Borrower and its Subsidiaries have complied with all applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government or any instrumentality or agency thereof, having jurisdiction over the conduct of their respective businesses or the ownership of their respective Property, except for any non-compliance which would not have a Material Adverse Effect.  Neither Borrower nor any Subsidiary has received any written notice to the effect that their operations are not in material compliance with any of the requirements of applicable federal, state and local environmental, health and safety statutes and regulations or the subject of any federal or state investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action could have a Material Adverse Effect.

5.13.

Ownership of Properties

.  On the date of this Agreement, the Borrower and its Subsidiaries will have good and marketable title, free of all Liens other than those permitted by Section 6.16, to all of the Property and assets reflected in the financial statements as owned by it, other than those assets represented by mortgage receivables that are required to be consolidated despite the fact that title to the mortgaged assets is not in the Borrower of any of its Subsidiaries.

5.14.

Investment Company Act

.  Neither the Borrower nor any Subsidiary is an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

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5.15.

Public Utility Holding Company Act

.  Intentionally Omitted.

5.16.

Solvency

.

(i)

Immediately after the Agreement Effective Date and immediately following the making of each Loan and after giving effect to the application of the proceeds of such Loans, (a) the fair value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (b) the present fair saleable value of the Property of the Borrower and its Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Borrower and its Subsidiaries on a c onsolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the date hereof.

(ii)

The Borrower does not intend to, or to permit any of its Subsidiaries to, and does not believe that it or any of its Subsidiaries will, incur debts beyond their ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.

5.17.

Insurance

  The Borrower and its Subsidiaries carry insurance on their Projects, including the Qualifying Collateral Pool Properties, with financially sound and reputable insurance companies, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar Projects in localities where the Borrower and its Subsidiaries operate, including, without limitation:

(i)

Property and casualty insurance (including coverage for flood and other water damage for any Project located within a 100-year flood plain) in the amount of the replacement cost of the improvements at the Projects (to the extent replacement cost insurance is maintained by companies engaged in similar business and owning similar properties);

(ii)

Builder’s risk insurance for any Project under construction in the amount of the construction cost of such Project;

(iii)

Loss of rental income insurance in the amount not less than one year’s gross revenues from the Projects; and

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(iv)

Comprehensive general liability or umbrella insurance in the amount of $20,000,000 per occurrence.

5.18.

Borrower Status

.  The Borrower is qualified as a real estate investment trust under Section 856 of the Code and currently is in compliance in all material respects with all provisions of the Code applicable to the qualification of the Borrower as a real estate investment trust.

5.19.

Environmental Matters

.  Each of the following representations and warranties is true and correct on and as of the Agreement Effective Date except as disclosed in the Disclosure Letter and to the extent that the facts and circumstances giving rise to any such failure to be so true and correct, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

(a)

To the knowledge of the Borrower, the Projects of the Borrower and its Subsidiaries do not contain any Materials of Environmental Concern in amounts or concentrations which constitute a violation of, or could reasonably give rise to liability of the Borrower or any Subsidiary under, Environmental Laws.

(b)

To the knowledge of the Borrower, (i) the Projects of the Borrower and its Subsidiaries and all operations at the Projects are in compliance with all applicable Environmental Laws, and (ii) with respect to all Projects owned by the Borrower and/or its Subsidiaries (x) for at least two (2) years, have in the last two years, or (y) for less than two (2) years, have for such period of ownership, been in compliance in all material respects with all applicable Environmental Laws.

(c)

Neither the Borrower nor any of its Subsidiaries has received any written notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Projects, nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened.

(d)

To the knowledge of the Borrower, Materials of Environmental Concern have not been transported or disposed of from the Projects of the Borrower and its Subsidiaries in violation of, or in a manner or to a location which could reasonably give rise to liability of the Borrower or any Subsidiary under, Environmental Laws, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Projects of the Borrower and its Subsidiaries in violation of, or in a manner that could give rise to liability of the Borrower or any Subsidiary under, any applicable Environmental Laws.

(e)

No judicial proceedings or governmental or administrative action is pending, or, to the knowledge of the Borrower, threatened, under any Environmental Law to which the Borrower or any of its Subsidiaries is or, to the Borrower’s knowledge, will be named as a party with respect to the Projects of the Borrower and its Subsidiaries, nor are there any consent decrees or other decrees, consent orders,

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administrative order or other orders, or other administrative of judicial requirements outstanding under any Environmental Law with respect to the Projects of the Borrower and its Subsidiaries.

(f)

To the knowledge of the Borrower, there has been no release or threat of release of Materials of Environmental Concern at or from the Projects of the Borrower and its Subsidiaries, or arising from or related to the operations of the Borrower and its Subsidiaries in connection with the Projects in violation of or in amounts or in a manner that could give rise to liability under Environmental Laws.

5.20.

OFAC Representation

.  The Borrower is not, and shall not be at any time, a person with whom the Lenders are restricted from doing business under the regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of Treasury of the United States of America (including, those Persons named on OFAC’s Specially Designated and Blocked Persons list) or under any statute, executive order (including, the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and shall not engage in any dealings or transactions or otherwise be associated with such persons.  In addition, the Borrower hereby agrees to provide to the Administrative Agent any information that the Administrative Agent deems necessary from time to time in order to ensure c ompliance with all applicable Laws concerning money laundering and similar activities.

5.21.

Intellectual Property

.

(i)

Borrower and each of its Subsidiaries owns or has the right to use, under valid license agreements or otherwise, all material patents, licenses, franchises, trademarks, trademark rights, trade names, trade name rights, trade secrets and copyrights (collectively, “Intellectual Property”) used in the conduct of their respective businesses as now conducted and as contemplated by the Loan Documents, without known conflict with any patent, license, franchise, trademark, trade secret, trade name, copyright, or other proprietary right of any other Person.

(ii)

Borrower and each of its Subsidiaries have taken all such steps as they deem reasonably necessary to protect their respective rights under and with respect to such Intellectual Property.

(iii)

No claim has been asserted by any Person with respect to the use of any Intellectual Property by Borrower or any of its Subsidiaries, or challenging or questioning the validity or effectiveness of any Intellectual Property.

(iv)

The use of such Intellectual Property by Borrower and each of its Subsidiaries does not infringe on the rights of any Person, subject to such claims and infringements as do not, in the aggregate, give rise to any liabilities on the part of the Borrower or any of its Subsidiaries that could be reasonably expected to have a Material Adverse Effect.

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5.22.

Broker’s Fees

.  No broker’s or finder’s fee, commission or similar compensation will be payable with respect to the transactions contemplated hereby.  Except as provided in the Fee Letter, no other similar fees or commissions will be payable by any Lender for any other services rendered to the Borrower, any of the Subsidiaries of the Borrower or any other Person ancillary to the transactions contemplated hereby.

5.23.

Initial Collateral Properties

.  As of the Agreement Effective Date, Schedule 1 is a correct and complete list of all Qualifying Collateral Pool Properties.

(a)

Each of the Qualifying Collateral Pool Properties is not located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of 1973, as amended, or any successor law, or, if located within any such area, the applicable Subsidiary Guarantor has obtained and will maintain through the Facility Termination Date the insurance prescribed in Section 5.17 hereof.

(b)

To the Borrower’s knowledge, each of the Qualifying Collateral Pool Properties and the present use and occupancy thereof are in material compliance with all material zoning ordinances (without reliance upon adjoining or other properties), building codes, land use and Environmental Laws, and other similar laws (“Applicable Laws”).

(c)

Each of the Qualifying Collateral Pool Properties is served by all utilities required for the current or contemplated use thereof.  Each of the Qualifying Collateral Pool Properties has accepted or is equipped to accept such utility service.

(d)

All public roads and streets necessary for service of and access to each of the Qualifying Collateral Pool Properties for the current or contemplated use thereof have been completed, and are open for use by the public, or appropriate insured private easements are in place.

(e)

Borrower is not aware of any material latent or patent structural or other significant deficiency of the Qualifying Collateral Pool Properties.  Each of the Qualifying Collateral Pool Properties is free of damage and waste that would materially and adversely affect the value of the Qualifying Collateral Pool Properties, is in good repair and to Borrower’s knowledge there is no deferred maintenance other than ordinary wear and tear.  Each of the Qualifying Collateral Pool Properties is free from damage caused by fire or other casualty.

(f)

To Borrower’s knowledge, all liquid and solid waste disposal, septic and sewer systems located on the Qualifying Collateral Pool Properties are in a good and safe condition and repair and to Borrower’s knowledge, in material compliance with all Applicable Laws with respect to such systems.

(g)

All improvements on the Qualifying Collateral Pool Properties lie within the boundaries and building restrictions of the legal description of record of Qualifying

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Collateral Pool Properties, no improvements encroach upon easements benefiting the Qualifying Collateral Pool Properties other than encroachments that do not materially adversely affect the use or occupancy of the Qualifying Collateral Pool Properties and no improvements on adjoining properties encroach upon the Qualifying Collateral Pool Properties or easements benefiting the Qualifying Collateral Pool Properties other than encroachments that do not materially adversely affect the use or occupancy of the Qualifying Collateral Pool Properties.

(h)

All Leases are in full force and effect. Neither Borrower nor any Subsidiary Guarantor is in material default under any Lease at a Qualifying Collateral Pool Property which demises more than five percent (5%) of the total gross leaseable or net rentable area of the related Project, and Borrower has disclosed to the Administrative Agent in writing any material default, by any other party of which Borrower has knowledge, under any such Lease.

(i)

There are no material delinquent taxes, ground rents, water charges, sewer rents, assessments, insurance premiums, leasehold payments, or other outstanding charges affecting the Qualifying Collateral Pool Properties except to the extent such items are being contested in good faith and as to which adequate reserves have been provided, except that certain income tax returns of Borrower, Parent or any Subsidiary thereof may be on extension.  Each of the Qualifying Collateral Pool Properties is taxed separately without regard to any other property not included in the  Qualifying Collateral Pool Properties and for all purposes each of the various contiguous components of the Qualifying Collateral Pool Properties.

(j)

No condemnation proceeding or eminent domain action is pending or threatened against any of the Qualifying Collateral Pool Properties which would impair the use, sale or occupancy of such Qualifying Collateral Pool Property (or any portion thereof) in any material manner.

(k)

Each of the Qualifying Collateral Pool Properties is not, nor is any direct or indirect interest of the Borrower or any Subsidiary therein, subject to any Lien other than Permitted Liens set forth in clauses (i) through (iv) of Section 6.16 or to any Negative Pledge (other than the Liens and Negative Pledges created pursuant to this Agreement to secure the obligations of the Borrower and the Subsidiary Guarantors).

5.24.

No Bankruptcy Filing

.  Neither Borrower nor any of its Subsidiaries is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of its assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against any of such Persons.

5.25.

No Fraudulent Intent

.  Neither the execution and delivery of this Agreement or any of the other Loan Documents nor the performance of any actions required hereunder or thereunder is being undertaken by Borrower or the Subsidiary Guarantors with or as a result of any actual intent by any of such Persons to hinder, delay or defraud any entity to which any of such Persons is now or will hereafter become indebted.

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5.26.

Transaction in Best Interests of Borrower and Subsidiary Guarantors; Consideration

.  The transaction evidenced by this Agreement and the other Loan Documents is in the best interests of Borrower and the Subsidiary Guarantors and their respective creditors.  The direct and indirect benefits to inure to Borrower and the Subsidiary Guarantors pursuant to this Agreement and the other Loan Documents constitute substantially more than “reasonably equivalent value” (as such term is used in §548 of the Bankruptcy Code) and “valuable consideration,” “fair value,” and “fair consideration” (as such terms are used in any applicable state fraudulent conveyance law), in exchange for the benefits to be provided by Borrower and the Subsidiary Guarantors pursuant to this Agreement and the other Loan Documents, and but for the willingness of each Subsidiary Guarantor to guaranty the Obligations, Borrower would be unable to obta in the financing contemplated hereunder which financing will enable Borrower and its subsidiaries to have available financing to conduct and expand their business.  Borrower and its Subsidiaries constitute a single integrated financial enterprise and receives a benefit from the availability of credit under this Agreement.

5.27.

Subordination

.  Borrower is not a party to or bound by any agreement, instrument or indenture that may require the subordination in right or time of payment of any of the Obligations to any other indebtedness or obligation of any such Persons.

5.28.

Tax Shelter Representation

.  Borrower does not intend to treat the Loans, and/or related transactions as being a “reportable transaction” (within the meaning of United States Treasury Regulation Section 1.6011-4).  In the event Borrower determines to take any action inconsistent with such intention, it will promptly notify the Administrative Agent thereof.  If Borrower so notifies the Administrative Agent, Borrower acknowledges that one or more of the Lenders may treat its Loans as part of a transaction that is subject to Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as applicable, will maintain the lists and other records required by such Treasury Regulation.

5.29.

Anti-Terrorism Laws

.

(i)

None of the Borrower or any of its Affiliates is in violation of any laws or regulations relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

(ii)

None of the Borrower or any of its Affiliates, or any of its brokers or other agents acting or benefiting from the Facility is a Prohibited Person.  A “Prohibited Person” is any of the following:

(1)

a person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order;

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(2)

a person or entity owned or controlled by, or acting for or on behalf of, any person or entity that is listed in the Annex to, or is otherwise subject to the provisions of, the Executive Order;

(3)

a person or entity with whom any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(4)

a person or entity who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

(5)

a person or entity that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list.

(iii)

None of the Borrower or any of its Affiliates or any of its brokers or other agents acting in any capacity in connection with the Facility (1) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person, (2) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order, or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

Borrower shall not (1) conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any Prohibited Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order or any other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law (and Borrower shall deliver to Administrative Agent any certification or other evidence requested from time to time by Administrative Agent in its reasonable discretion, confirming Borrower’s compliance herewith).

Notwithstanding the foregoing, at any time that Borrower retains its status as a publicly held company, the representations made in this Section 5.29 are limited to the Borrower’s knowledge with respect to Affiliates who are Affiliates due to ownership due to 10% or more of any class of voting securities.

5.30.

Survival

.  All statements contained in any certificate, financial statement or other instrument delivered by or on behalf of Borrower or any of its Subsidiaries to the Administrative Agent or any Lender pursuant to or in connection with this Agreement or any of the other Loan Documents (including, but not limited to, any such statement made in or in connection with any

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amendment hereto or thereto or any statement contained in any certificate, financial statement or other instrument delivered by or on behalf of the Borrower prior to the Agreement Effective Date and delivered to the Administrative Agent or any Lender in connection with closing the transactions contemplated hereby) shall constitute representations and warranties made by the Borrower under this Agreement.  All such representations and warranties under this Agreement or any of the other Loan Documents shall survive the effectiveness of this Agreement and such Loan Documents, the execution and delivery of any additional Loan Documents and the making of further Loans and the issuance of further Facility Letters of Credit.

ARTICLE VI.
COVENANTS

During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing:

6.1.

Financial Reporting

.  The Borrower will maintain for the Consolidated Group a system of accounting established and administered in accordance with GAAP, and furnish to the Administrative Agent and the Lenders:

(i)

As soon as available, but in any event not later than 45 days after the close of each fiscal quarter, for the Borrower and its Subsidiaries, financial statements prepared in accordance with GAAP, including an unaudited consolidated balance sheet as of the close of each such period and the related unaudited consolidated income statement and statement of cash flows of the Borrower and its Subsidiaries for such period and the portion of the fiscal year through the end of such period, setting forth in each case in comparative form the figures for the previous year, if any, all certified by an Authorized Officer of the Borrower;

(ii)

As soon as available, but in any event not later than 45 days after the close of each fiscal quarter, for the Borrower and its Subsidiaries, the following reports in form and substance reasonably satisfactory to the Administrative Agent, all certified by an Authorized Officer of the Borrower:

(1)

a schedule listing all Projects and summary information for each Project, including location, square footage, occupancy, Net Operating Income, debt, and such additional information on all Projects as may be reasonably requested by the Administrative Agent,

(2)

rent rolls and operating statements for each of the Qualifying Collateral Pool Properties, together with a description of any then-existing defaults by a tenant under a Major Lease (as such term is defined in the form of the Mortgage attached as Exhibit I) at any such Qualifying Collateral Pool Properties, and the Adjusted Collateral Pool NOI and occupancy percentage thereof as of the end of the prior fiscal quarter, and

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(3)

such information as is reasonably requested by the Administrative Agent to determine compliance with the covenants contained in Sections 6.21(iv)- (vi) of this Agreement;

(iii)

As soon as available, but in any event not later than 90 days after the close of each fiscal year, for the Borrower and its Subsidiaries, audited financial statements, including a consolidated balance sheet as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, without a “going concern” or like qualification or exception, or qualification arising out of the scope of the audit, prepared by independent certified public accountants of nationally recognized standing reasonably acceptable to Administrative Agent, and indicating no material weakness in Borrower’s  internal controls, together with such additional information and consolidating schedules as may be reasonably requested by the Administrative Agent;

(iv)

As soon as available, but in any event not later than 90 days after the close of each fiscal year for the Borrower and its Subsidiaries, a statement detailing the contributions to Consolidated NOI from each individual Project for the prior fiscal year in form and substance reasonably satisfactory to the Administrative Agent, certified by an Authorized Officer of the Borrower;

(v)

Together with the quarterly and annual financial statements required hereunder, a compliance certificate in substantially the form of Exhibit D hereto signed by an Authorized Officer of the Borrower showing the calculations and computations necessary to determine compliance with this Agreement and stating that, to such officer’s knowledge, no Default or Unmatured Default exists, or if, to such officer’s knowledge, any Default or Unmatured Default exists, stating the nature and status thereof;

(vi)

As soon as possible and in any event within 10 days after a responsible officer of the Borrower knows that any Reportable Event has occurred with respect to any Plan, a statement, signed by an Authorized Officer of the Borrower, describing said Reportable Event and the action which the Borrower proposes to take with respect thereto;

(vii)

As soon as possible and in any event within 10 days after receipt by a responsible officer of the Borrower, a copy of (a) any notice or claim to the effect that the Borrower or any of its Subsidiaries is or may be liable to any Person as a result of the release by the Borrower, any of its Subsidiaries, or any other Person of any toxic or hazardous waste or substance into the environment, and (b) any notice alleging any violation of any federal, state or local environmental, health or safety law or regulation by such Borrower or any of its Subsidiaries, which, in either case, could have a Material Adverse Effect;

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(viii)

Promptly upon the furnishing thereof to the shareholders of the Borrower, copies of all financial statements, reports and proxy statements so furnished, including without limitation all form 10-K and 10-Q reports filed with the SEC; and

(ix)

Such other information (including, without limitation, financial statements for the Borrower and non-financial information) as the Administrative Agent or any Lender may from time to time reasonably request.

6.2.

Use of Proceeds

.

(a)

The Borrower will use the proceeds of the Advances solely (i) to finance the cost of the Borrower’s or its Subsidiaries’ acquisition, development and redevelopment of Projects, and related tenant improvements, capital expenditures, leasing commissions, (ii) for bridge debt financing, and (iii) for working capital (but in all circumstances excluding the repurchase of any common shares of the Borrower), including without limitation payment of “earn-outs,” other payments Borrower or any Subsidiary is contractually obligated to make as a result of any prior acquisitions of Projects, contractually obligated payments for redemptions of membership interests under limited liability company operating agreements, and margin payments with respect to Marketable Securities.

(b)

Without limitation of the foregoing, the Borrower will not, nor will it permit any Subsidiary to, use any of the proceeds of the Advances (i) to purchase or carry any “margin stock” (as defined in Regulation U) if such usage could constitute a violation of Regulation U by any Lender, (ii) to fund any purchase of, or offer for, any Capital Stock of any Person, unless such Person has consented to such offer prior to any public announcements relating thereto, or (iii) to make any Acquisition other than a Permitted Acquisition.

6.3.

Notice of Default

.  The Borrower will give, and will cause each of its Subsidiaries to give, prompt notice in writing to the Administrative Agent and the Lenders of the occurrence of any Default or Unmatured Default and of any other development, financial or otherwise (including the filing of material litigation), which could reasonably be expected to have a Material Adverse Effect.

6.4.

Conduct of Business

.  The Borrower will do, and will cause each of its Subsidiaries to do, all things necessary to remain duly incorporated or duly qualified, validly existing and in good standing as a real estate investment trust, corporation, general partnership, limited partnership, or limited liability company, as the case may be, in its jurisdiction of incorporation/formation (except with respect to mergers permitted pursuant to Section 6.12 and Permitted Acquisitions) and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted and to carry on and conduct its businesses in substantially the same manner as they are presently conducted where the failure to do so could reasonably be expected to have a Material Adverse Effect and, specifically, neither the Borrower nor its Subsidiaries may undertake any business other than the acquis ition,

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development, ownership, management, operation and leasing of Projects, and any business activities and investments incidental thereto, including investments in Marketable Securities, subject to the limitations on Permitted Investments and Permitted Acquisitions established hereunder.

6.5.

Taxes

.  Subject to any more stringent requirements contained in the Mortgages with respect to the Qualifying Collateral Pool Properties, the Borrower will pay, and will cause each of its Subsidiaries to pay, when due all taxes, assessments and governmental charges and levies upon them or their income, profits or Projects, except those which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves have been set aside.

6.6.

Insurance

.  Subject to any more stringent requirements contained in the Mortgages with respect to the Qualifying Collateral Pool Properties, the Borrower will, and will cause each of its Subsidiaries to, maintain insurance which is consistent with the representation contained in Section 5.17 on all their Property and the Borrower will furnish to any Lender upon reasonable request full information as to the insurance carried.

6.7.

Compliance with Laws

.  Subject to any more stringent requirements contained in the Mortgages with respect to the Qualifying Collateral Pool Properties, the Borrower will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which they may be subject, the violation of which could reasonably be expected to have a Material Adverse Effect.

6.8.

Maintenance of Properties

.  The Borrower will, and will cause each of its Subsidiaries to, do all things necessary to maintain, preserve, protect and keep their respective Projects and Properties, reasonably necessary for the continuous operation of the Projects, in good repair, working order and condition, ordinary wear and tear excepted.

6.9.

Inspection

.  The Borrower will, and will cause each of its Subsidiaries to, permit the Lenders upon reasonable notice, by their respective representatives and agents, to inspect any of the Projects, corporate books and financial records of the Borrower and each of its Subsidiaries, to examine and make copies of the books of accounts and other financial records of the Borrower and each of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and each of its Subsidiaries with officers thereof, and to be advised as to the same by, their respective officers at such reasonable times and intervals as the Lenders may designate.

6.10.

Maintenance of Status

.  The Borrower shall at all times  maintain its status as a real estate investment trust in compliance with all applicable provisions of the Code relating to such status.

6.11.

Dividends

.  Borrower may (i) make any distributions in redemption of any Capital Stock of the Borrower and (ii) make or declare any dividends or similar distributions with respect to its common Capital Stock so long as the Dividend Payout Ratio of the Borrower shall not exceed 95%, provided that during the continuation of any Default under the Loan Documents,

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Borrower shall only be permitted to make or declare such dividends or distributions after obtaining the written consent of the Administrative Agent and Required Lenders.  The Borrower shall, on a quarterly basis, deliver to the Administrative Agent evidence satisfactory to the Administrative Agent of the application of Dividend Reinvestment Proceeds and a certificate from the chief financial officer of the Borrower that the Borrower shall continue to be in compliance with all applicable provisions of the Code and its bylaws and operating covenants after giving effect to such dividends or distributions.  Notwithstanding the foregoing, the Borrower shall be permitted at all times to distribute the minimum amount of dividends necessary to maintain its tax status as a real estate investment trust.

6.12.

Merger; Sale of Assets

.  The Borrower will not, nor will it permit any of its Subsidiaries to, enter into any merger (other than mergers in which the Borrower or one of its Subsidiaries is the survivor and mergers of Subsidiaries as part of transactions that are Permitted Acquisitions provided that following such merger the target entity becomes a Wholly-Owned Subsidiary of Borrower), consolidation, reorganization or liquidation or transfer or otherwise dispose of all or a Substantial Portion of their Properties, except for (a) such transactions that occur between Wholly-Owned Subsidiaries or between Borrower and a Wholly-Owned Subsidiary and (b) mergers solely to change the jurisdiction of organization of a Subsidiary, provided that, in any event, approval in advance by the Required Lenders shall be required for transfer or disposition in any fiscal quarter of assets with an aggregate value greater than 10% of Total Asset Value, or any merger resulting in an increase to the Total Asset Value of more than 25% and the Borrower shall, regardless of any such merger or other transaction, continue as a surviving entity.  Regardless of whether approval of the Required Lenders is necessary, for any sale, merger, or transfer of any Project or ownership interest in a Project which causes the aggregate value of such transactions in a single calendar quarter to exceed $250,000,000, the Borrower will give prior notice to the Administrative Agent and will deliver to the Administrative Agent a pro-forma compliance certificate based on the results of such transaction demonstrating compliance with the covenants contained herein.

6.13.

Intentionally Omitted

.

6.14.

Sale and Leaseback

.  The Borrower will not, nor will it permit any of its Subsidiaries to, sell or transfer a Substantial Portion of its Property in order to concurrently or subsequently lease such Property as lessee.

6.15.

Acquisitions and Investments

.  The Borrower will not, nor will it permit any Subsidiary to, make or suffer to exist any Investments (including without limitation, loans and advances to, and other Investments in, Subsidiaries), or commitments therefor, or become or remain a partner in any partnership or joint venture, or to make any Acquisition of any Person, except:

(i)

Cash Equivalents and Marketable Securities;

(ii)

Investments in existing Subsidiaries, Investments in Subsidiaries formed for the purpose of developing or acquiring Projects, Investments in joint

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ventures and partnerships engaged solely in the business of purchasing, developing, owning, operating, leasing and managing Projects;

(iii)

transactions permitted pursuant to Section 6.12;

(iv)

Permitted Investments pursuant to Section 6.23;

(v)

Acquisitions of Persons whose primary operations consist of the ownership, development, operation and management of Projects; and

(vi)

Acquisitions of property management companies.

provided that, after giving effect to such Acquisitions and Investments, Borrower continues to comply with all its covenants herein.  Acquisitions permitted pursuant to this Section 6.15 shall be deemed to be “Permitted Acquisitions”.

6.16.

Liens

.  Subject to any more stringent requirements contained in the Mortgages with respect to the Qualifying Collateral Pool Properties, the Borrower will not, nor will it permit any of its Subsidiaries to, create, incur, or suffer to exist any Lien in, of or on the Property of the Borrower or any of its Subsidiaries, except:

(i)

Liens for taxes, assessments or governmental charges or levies on its Property if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings and for which adequate reserves shall have been set aside on its books;

(ii)

Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ liens and other similar liens arising in the ordinary course of business which secure payment of obligations not more than 60 days past due or which are being contested in good faith by appropriate proceedings and for which adequate reserves shall have been set aside on their books;

(iii)

Liens arising out of pledges or deposits under workers’ compensation laws, unemployment insurance, old age pensions, or other social security or retirement benefits, or similar legislation;

(iv)

Easements, restrictions and such other encumbrances or charges against real property as are of a nature generally existing with respect to properties of a similar character and which do not in any material way affect the marketability of the same or interfere with the use thereof in the business of the Borrower or its Subsidiaries; and

(v)

First priority Liens other than Liens described in subsections (i) through (iv) above arising in connection with any Indebtedness permitted hereunder to the extent such Liens will not result in a Default in any of Borrower’s covenants herein.

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Liens permitted pursuant to this Section 6.16 shall be deemed to be “Permitted Liens”.

6.17.

Affiliates

.  The Borrower will not, nor will it permit any of its Subsidiaries to, enter into any transaction (including, without limitation, the purchase or sale of any Property or service) with, or make any payment or transfer to, any Affiliate except in the ordinary course of business and pursuant to the reasonable requirements of the Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than the Borrower or such Subsidiary would obtain in a comparable arms-length transaction.

6.18.

Financial Undertakings

.  The Borrower will not enter into or remain liable upon, nor will they permit any Subsidiary to enter into or remain liable upon, any Financial Undertaking, except to the extent required to protect the Borrower and its Subsidiaries against increases in interest payable by them under variable interest Indebtedness.

6.19.

Variable Interest Indebtedness

.  The Borrower and its Subsidiaries shall not permit the outstanding principal balance of any Consolidated Outstanding Indebtedness which bears interest at an interest rate that is not fixed through the maturity date of such Indebtedness to exceed twenty percent (20%) of Total Asset Value, unless all of such Indebtedness in excess of such amount is subject to a Rate Management Transaction approved by the Administrative Agent that effectively converts the interest rate on such excess to a fixed rate.

6.20.

Consolidated Net Worth

.  The Borrower shall maintain a Consolidated Net Worth of not less than $1,750,000,000 plus seventy-five percent (75%) of the equity contributions or sales of treasury stock received by the Borrower after the Agreement Effective Date.

6.21.

Indebtedness and Cash Flow Covenants

.  The Borrower on a consolidated basis with its Subsidiaries shall not permit:

(i)

The Leverage Ratio to exceed (A) prior to the issuance of Borrower’s financial results for the quarter ending December 31, 2011, sixty-seven and one-half percent (67.5%), (B) on the date of such issuance and at any time thereafter prior to the issuance of Borrower’s financial results for the quarter ending June 30, 2012, sixty-five percent (65%), and (C) on the date of issuance of such June 30, 2012 results and at all times thereafter, sixty percent (60%);

(ii)

The Fixed Charge Coverage Ratio to be less than (A) prior to the issuance of Borrower’s financial results for the quarter ending December 31, 2011, 1.40 to 1.00, (B) on the date of such issuance and at all times prior to the issuance of Borrower’s financial results for the quarter ending December 31, 2012, 1.45 to 1.00, and (C) on the date of issuance of such December 31, 2012 results and at all times thereafter, 1.50 to 1.00;

(iii)

The aggregate amount, without duplication, of (A) all Unsecured Indebtedness of the Borrower or of any of its Subsidiaries, (B) all Guarantee Obligations of the Borrower or of any of its Subsidiaries, (C) all Recourse

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Indebtedness of the Borrower or of any of its Subsidiaries (excluding for purposes of each of clauses (A), (B) and (C) of this Section 6.21(iii) all Indebtedness and Guarantee Obligations owing to the Lenders from time to time pursuant this Agreement) to exceed $100,000,000;

(iv)

the Collateral Pool Leverage Ratio to exceed (A) prior to the issuance of Borrower’s financial results for the quarter ending March 31, 2012, sixty-five percent (65%) or (B) at any time thereafter, sixty percent (60%) provided that no breach of this Section 6.21(iv) shall occur unless and until Borrower has failed to make the principal payments required to restore compliance with this covenant as provided in Section 2.8(b);

(v)

the Collateral Pool Debt Service Coverage to be less than (A) prior to issuance of Borrower’s financial results for the quarter ending March 31, 2012, 1.50 to 1.00 or (B) at any time thereafter, 1.60 to 1.00, provided that no breach of this Section 6.21(v) shall occur unless and until Borrower has failed to make the principal payments required to restore compliance with this covenant as provided in Section 2.8(b); or

(vi)

the Collateral Pool Value to be less than $350,000,000, or there to be fewer than ten (10) Qualifying Collateral Pool Properties, at any time.

The foregoing covenants shall be deemed to have replaced the corresponding provisions of Section 6.21 of the Original Credit Agreement as of December 31, 2010 and for the period from such date through the Agreement Effective Date for purposes of determining Borrower’s compliance under the Original Credit Agreement as of December 31, 2010 and thereafter through the Agreement Effective Date.

6.22.

Environmental Matters

.  The Borrower and its Subsidiaries shall:

(a)

Comply with, and use all reasonable efforts to ensure compliance by all tenants and subtenants, if any, with, all applicable Environmental Laws and obtain and comply with and maintain, and use all reasonable efforts to ensure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws, except to the extent that failure to do so could not be reasonably expected to have a Material Adverse Effect; provided that in no event shall the Borrower or its Subsidiaries be required to modify the terms of leases, or renewals thereof, with existing tenants (i) at Projects owned by the Borrower or its Subsidiaries as of the date hereof, or (ii) at Projects hereafter acquired by the Borrower or its Subsidiaries as of the date of such acquisition, to add provisions to such effect.

(b)

Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws, except to the extent that (i) the

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same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not be reasonably expected to have a Material Adverse Effect, or (ii) the Borrower has determined in good faith that contesting the same is not in the best interests of the Borrower and its Subsidiaries and the failure to contest the same could not be reasonably expected to have a Material Adverse Effect.

(c)

Defend, indemnify and hold harmless Administrative Agent and each Lender, and its respective officers, directors, agents and representatives from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to (i) the violation of, noncompliance with or liability under any Environmental Laws applicable to the operations of the Borrower, its Subsidiaries or the Projects, or any orders, requirements or demands of Governmental Authorities related thereto, (ii) any investigation, cleanup, remediation, removal, or restoration of conditions relating to any Qualifying Collateral Pool Property due to a Release of Hazardous Materials (whether on such property or migrating to or from such property), (iii) any damages, harm, or injuries to the person or property of any third parties or to any natural resources resulting from a Release of Hazardous Materials relating to any Qualifying Collateral Pool Property, (iv) any actual or alleged past or present disposal, generation, manufacture, presence, processing, production, Release, storage, transportation, treatment, or use of any Hazardous Material at, on or from any Qualifying Collateral Pool Property, and (v) any actual or alleged presence of any Hazardous Material on any Qualifying Collateral Pool Property, including, without limitation, attorney’s and consultant’s fees, investigation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefore.  This indemnity shall continue in full force and effect regardless of the termination of this Agreement.

(d)

Prior to the acquisition of a new Project after the Agreement Effective Date, perform or cause to be performed an environmental investigation which investigation shall at a minimum comply with the specifications and procedures attached hereto as Exhibit E.  In connection with any such investigation, Borrower shall cause to be prepared a report of such investigation, to be made available to any Lenders upon reasonable request, for informational purposes and to assure compliance with the specifications and procedures.

6.23.

Permitted Investments

.  The Consolidated Group’s activities shall be limited to acquiring Projects (including Single Tenant Projects), engaging in construction activities and any business activities and investments incidental thereto (including investments in Marketable Securities, including without limitation Capital Stock in other real estate investment trusts which are publicly traded on a national exchange) except that the following Investments (“Permitted Investments”) shall also be permitted so long as the aggregate value of the Permitted Investments under each of the following clauses (a) through (d) shall not at any time exceed the individual percentage of Total Asset Value limits stated in such clause and the aggregate value

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of the Permitted Investments under all such clauses on a combined basis shall not at any time exceed twenty-five percent (25%) of Total Asset Value:

(a)

Unimproved Land and any other land not included in Unimproved Land or Construction in Progress -- five percent (5%) of Total Asset Value;

(b)

Investments in Investment Affiliates (valued at the greater of the cash investment in that entity by the Borrower or the portion of Total Asset Value attributable to such entity or its assets as the case may be) -- fifteen percent (15%) of Total Asset Value;

(c)

Construction in Progress -- ten (10%) of Total Asset Value; and

(d)

First Mortgage Receivables -- five percent (5%) of Total Asset Value.

The order and method of calculating the foregoing limitations shall be as shown on the form of compliance certificate attached as Exhibit D.

6.24.

Minimum Average Occupancy

.  The Borrower agrees that the average economic occupancy of the overall portfolio of Projects (excluding Construction in Progress) owned by the Consolidated Group for each fiscal quarter shall exceed 80% of the average gross leaseable area of such Projects for such fiscal quarter.  As used herein, economic occupancy shall mean occupancy by a tenant other than an Excluded Tenant.

6.25.

Prohibited Encumbrances

.  The Borrower agrees that neither the Borrower nor any other members of the Consolidated Group shall (i) create or permit a Lien against any Project other than a single first-priority mortgage, deed to secure debt or deed of trust, (ii) create or permit a Lien on any Capital Stock or other ownership interests in any member of the Consolidated Group or any Investment Affiliate (other than the Liens against the Collateral created under the Loan Documents) or (iii) enter into or be subject to any agreement governing any Indebtedness which constitutes a Negative Pledge, an unencumbered asset covenant or other similar covenant or restriction which prohibits or limits the ability of Borrower or any other member of the Consolidated Group to sell or create Liens against any Projects (other than restrictions on further subordinate Liens on Projects already encumbered by a first-priorit y mortgage, deed to secure debt or deed of trust).

6.26.

Subsidiary Guaranty

.  Borrower shall cause each of its existing Subsidiaries listed on Schedule 2, which includes all current subsidiaries of Borrower other than Excluded Subsidiaries, to execute and deliver to the Administrative Agent the Subsidiary Guaranty.  Borrower shall cause each Subsidiary which is hereafter acquired or formed (other than Excluded Subsidiaries) to execute and deliver to the Administrative Agent a joinder in the Subsidiary Guaranty in the form of Exhibit A attached to the form of Subsidiary Guaranty. Borrower covenants and agrees that each Subsidiary which it shall cause to execute the Subsidiary Guaranty shall be fully authorized to do so by its supporting organizational and authority documents and shall be in good standing in its state of organization and shall have obtained any necessary foreign qualifications required to conduct its business.  If a Subs idiary that is initially not required to join in a Subsidiary Guaranty because it was an Excluded

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Subsidiary is later not precluded from doing so, then Borrower shall cause such Subsidiary to join in the Subsidiary Guaranty. The delivery by Borrower to the Administrative Agent of any such joinder shall be deemed a representation and warranty by Borrower that each Subsidiary which Borrower caused to execute the Subsidiary Guaranty has been fully authorized to do so by its supporting organizational and authority documents and is in good standing in its state of organization and has obtained any necessary foreign qualifications required to conduct its business.

6.27.

Releases

.  With respect to any Subsidiary Guarantor whose Project has been encumbered with a Mortgage, if the release of such Mortgage has been approved under Section 2.3 above and such Subsidiary Guarantor owns no other Projects encumbered by a Mortgage, then the Administrative Agent is authorized to release such Subsidiary from its obligations under the Subsidiary Guaranty, effective upon the date that such Mortgage is released.  With respect to any other Subsidiary Guarantor, the Administrative Agent is authorized to release such Subsidiary Guarantor from its obligations under the Subsidiary Guaranty effective upon the date that such Subsidiary Guarantor shall either become an Excluded Subsidiary or sell all of its assets.

6.28.

Amendments to Organizational Documents

. The Borrower shall not permit any material amendment to be made to its organizational documents without the prior written consent of the Required Lenders.

ARTICLE VII.
DEFAULTS

The occurrence of any one or more of the following events shall constitute a Default:

7.1.

Nonpayment of any principal payment due hereunder or under any Note when due.  Nonpayment of interest upon any Note or of any Unused Fee or other payment Obligations under any of the Loan Documents within five (5) Business Days after the same becomes due.

7.2.

The breach of any of the terms or provisions of Sections 6.2 through 6.21 and 6.23 through 6.27.

7.3.

Any representation or warranty made or deemed made by or on behalf of the Borrower or any other members of the Consolidated Group to the Lenders or the Administrative Agent under or in connection with the Agreement, any Loan, or any material certificate or information delivered in connection with the Agreement or any other Loan Document shall be materially false on the date as of which made.

7.4.

The breach by the Borrower (other than a breach which constitutes a Default under Section 7.1, 7.2, 7.3 or 7.4) of any of the terms or provisions of the Agreement which is not remedied within five (5) days after written notice from the Administrative Agent or any Lender.

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7.5.

Failure of the Borrower or any other member of the Consolidated Group to pay when due (A) any Recourse Indebtedness with respect to which the aggregate recourse liability exceeds $20,000,000 or (B) any other Indebtedness in excess of $100,000,000 in the aggregate (any Indebtedness in excess of the limits described in clauses (A) or (B) being referred to herein as “Material Indebtedness”); or the default by the Borrower or any other member of the Consolidated Group in the performance of any term, provision or condition contained in any agreement, or any other event shall occur or condition exist, which causes or permits any such Material Indebtedness to be due and payable or required to be prepaid (other than by a regularly scheduled payment) prior to the stated maturity thereof, provided however that (i) in the case of Secured Indebtedness which is not Recourse Indebtedness, the failure to pay any such Indebtedness when due shall not constitute a Default, and such Indebtedness shall be excluded from and shall not be counted toward the applicable aggregate limits described in clauses (A) and (B) above, so long as the only default by Borrower or such member is the failure to pay such Indebtedness when due at maturity and Borrower or such member is actively pursuing the extension or refinancing of such Indebtedness and the holder of such Indebtedness has not initiated a foreclosure of its Lien or proceedings to have a receiver appointed for the collateral securing such Indebtedness, except that (x) the deferral under this clause shall not extend for more than ninety (90) days after the maturity date of such Indebtedness, subject to extension of such deferral period for an additional thirty (30) days if prior to the expiration of such 90 day period Borrower has provided to the Administrative Agent evidence reasonably satisfactory to the Administrative Agent that Borro wer or such member is continuing to diligently pursue such an extension or refinancing, and (y) the aggregate amount of such Secured Indebtedness that may be at any time be excluded from and not counted toward the applicable aggregate limits described in clauses (A) and (B) above as a result of such deferral shall not exceed $100,000,000 and any excess over $100,000,000 shall be included in and counted toward such limits under clauses (A) and (B) above, (ii) certain existing Secured Indebtedness described in the Disclosure Letter in the aggregate outstanding principal amount of approximately $39,500,000 shall be excluded from and not counted toward any calculations of Material Indebtedness if the default under such Secured Indebtedness arises solely from a transfer of interests in the Borrower in violation of covenants against transfers of indirect interests in the obligors thereunder and (iii) certain other existing Secured Indebtedness described in the Disclosure Letter in the outstanding principal amount of approximately $30,000,000 which is currently outstanding beyond the maturity date thereof shall be excluded from and not counted toward Material Indebtedness regardless of any default thereunder and non-payment of such other Secured Indebtedness shall not in any event give rise to a Default hereunder.    

7.6.

The Borrower or any other member of the Consolidated Group shall (i) have an order for relief entered with respect to it under the Federal bankruptcy laws as now or hereafter in effect, (ii) make an assignment for the benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any Substantial Portion of its Property, (iv) institute any proceeding seeking an order for relief under the Federal bankruptcy laws as now or hereafter in effect or seeking to adjudicate it as a bankrupt or insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating

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to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, (v) take any corporate action to authorize or effect any of the foregoing actions set forth in this Section 7.6, (vi) fail to contest in good faith any appointment or proceeding described in Section 7.7 or (vii) admit in writing its inability to pay its debts generally as they become due.

7.7.

A receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any other member or for any Substantial Portion of the Property of the Borrower or such other member of the Consolidated Group, or a proceeding described in Section 7.6(iv) shall be instituted against the Borrower or any such other member of the Consolidated Group and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of ninety (90) consecutive days.

7.8.

The Borrower or any other member of the Consolidated Group shall fail within sixty (60) days to pay, bond or otherwise discharge any judgments or orders issued in proceedings with respect to which Borrower has been properly served or has been given due and proper written notice for the payment of money in an amount which, (excluding, however, any such judgments or orders related to any then outstanding Indebtedness which is not Recourse Indebtedness and which was not paid when due or is otherwise in default as described in Section 7.5 above, not to exceed, if such Indebtedness is included in Material Indebtedness, in the aggregate the $100,000,000 limit set forth in such Section 7.5), when added to all other judgments or orders outstanding against the Borrower or any other member of the Consolidated Group would exceed $50,000,000 in the aggregate, which have not b een stayed on appeal or otherwise appropriately contested in good faith.

7.9.

The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that it has incurred withdrawal liability to such Multiemployer Plan in an amount which, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Borrower or any other member of the Controlled Group as withdrawal liability (determined as of the date of such notification), exceeds $1,000,000 or requires payments exceeding $500,000 per annum.

7.10.

The Borrower or any other member of the Controlled Group shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization or is being terminated, within the meaning of Title IV of ERISA, if as a result of such reorganization or termination the aggregate annual contributions of the Borrower and the other members of the Controlled Group (taken as a whole) to all Multiemployer Plans which are then in reorganization or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the respective plan years of each such Multiemployer Plan immediately preceding the plan year in which the reorganization or termination occurs by an amount exceeding $500,000.

7.11.

Failure to remediate within the time period permitted by law or governmental order, after all administrative hearings and appeals have been concluded (or within a reasonable time in light of the nature of the problem if no specific time period is so established), material environmental problems at Properties owned by the Borrower or any other Member of

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the Consolidated Group or Investment Affiliates that have aggregate book values in excess of $50,000,000.

7.12.

The occurrence of any “Default” as defined in any Loan Document or the breach of any of the terms or provisions of any Loan Document, which default or breach continues beyond any period of grace therein provided.

7.13.

The attempted revocation, challenge, disavowment, or termination by the Borrower or any Subsidiary Guarantor of any of the Loan Documents.

7.14.

Any Change in Control shall occur.

7.15

Any Change in Management shall occur.

ARTICLE VIII.
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

8.1.

Acceleration

.  If any Default described in Section 7.6 or 7.7 occurs with respect to the Borrower, the obligations of the Lenders to make Loans and hereunder shall automatically terminate and the Obligations shall immediately become due and payable without any election or action on the part of the Administrative Agent or any Lender.  If any other Default occurs, so long as a Default exists Lenders shall have no obligation to make any Loans and the Required Lenders, at any time prior to the date that such Default has been fully cured, may permanently terminate the obligations of the Lenders to make Loans hereunder and declare the Obligations to be due and payable, or both, whereupon (i) if the Required Lenders have elected to accelerate, the Obligations shall become immediately due and payable, without presentment, demand, protest or notice of any kind, all of which the Bo rrower hereby expressly waives and (ii) if any automatic or optional acceleration has occurred, the Administrative Agent, as directed by the Required Lenders (or if no such direction is given within 30 days after a request for direction, as the Administrative Agent deems in the best interests of the Lenders, in its sole discretion, until receipt of a subsequent direction from the Required Lenders), shall use its good faith efforts to collect, including without limitation, by filing and diligently pursuing judicial action, all amounts owed by the Borrower under the Loan Documents and to exercise all other rights and remedies available under applicable law.

In addition to the foregoing, following the occurrence of an Unmatured Default and so long as any Facility Letter of Credit has not been fully drawn and has not been cancelled or expired by its terms, upon demand by the Required Lenders the Borrower shall deposit in the Letter of Credit Collateral Account cash in an amount equal to the aggregate undrawn face amount of all outstanding Facility Letters of Credit and all fees and other amounts due or which may become due with respect thereto.  The Borrower shall have no control over funds in the Letter of Credit Collateral Account and shall not be entitled to receive any interest thereon.  Such funds shall be promptly applied by the Administrative Agent to reimburse the Issuing Bank for drafts drawn from time to time under the Facility Letters of Credit and associated issuance costs and fees.  Such funds, if any, re maining in the Letter of Credit Collateral Account following

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the payment of all Obligations in full shall, unless the Administrative Agent is otherwise directed by a court of competent jurisdiction, be promptly paid over to the Borrower.

If, within 10 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Default (other than any Default as described in Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, all of the Lenders (in their sole discretion) shall so direct, the Administrative Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination.

8.2.

Amendments

.  Subject to the provisions of this Article VIII the Required Lenders (or the Administrative Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Default hereunder; provided, however, that no such supplemental agreement or waiver shall, without the consent of all Lenders:

(i)

Extend the Facility Termination Date (except as provided in Section 2.1), forgive all or any portion of the principal amount of any Loan or accrued interest thereon or of the Facility Letter of Credit Obligations or of the Unused Fee, reduce either of the Applicable Margins (or modify any definition herein which would have the effect of reducing either of the Applicable Margins) or the underlying interest rate options or extend the time of payment of any such principal, interest or Unused Fees and Facility Letter of Credit Fees;

(ii)

Change the percentage specified in the definition of Majority Lenders or Required Lenders;

(iii)

Increase the aggregate Revolving Commitments beyond $500,000,000, provided that no Lender’s Commitment can be increased without the consent of such Lender;

(iv)

Permit the Borrower to assign its rights under the Agreement or otherwise release the Borrower from any portion of the Obligations;

(v)

Release any Subsidiary Guarantor (other than a Subsidiary Guarantor released pursuant to Section 6.27) from the Subsidiary Guaranty and from any liability it may undertake with respect to the Obligations;

(vi)

Release any Mortgage (other than in accordance with Section 2.3); and

(vii)

Amend Sections 2.13, 8.1, 8.2 or 11.2.

No amendment of any provision of the Agreement relating to the Administrative Agent shall be effective without the written consent of the Administrative Agent.

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8.3.

Preservation of Rights

.  No delay or omission of the Lenders or the Administrative Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of a Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence.  Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2, and then only to the extent in such writing specifically set forth.  All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Administrative Agent and the Lenders until the Obligations have been paid in full.

8.4.

Insolvency of Borrower

.  In the event of the insolvency of the Borrower, the Commitments shall automatically terminate, the Lenders shall have no obligation to make further disbursements of the Facility, and the outstanding principal balance of the Facility, including accrued and unpaid interest thereon, shall be immediately due and payable.

ARTICLE IX.
GENERAL PROVISIONS

9.1.

Survival of Representations

.  All representations and warranties of the Borrower contained in the Agreement shall survive delivery of the Notes and the making of the Loans herein contemplated.

9.2.

Governmental Regulation

.  Anything contained in the Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any applicable statute or regulation.

9.3.

Taxes

.  Any taxes (excluding taxes on the overall net income of any Lender) or other similar assessments or charges made by any governmental or revenue authority in respect of the Loan Documents shall be paid by the Borrower, together with interest and penalties, if any.

9.4.

Headings

.  Section headings in the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.

9.5.

Entire Agreement

.  The Loan Documents embody the entire agreement and understanding among the Borrower, the Administrative Agent and the Lenders and supersede all prior commitments, agreements and understandings among the Borrower, the Administrative Agent and the Lenders relating to the subject matter thereof.

9.6.

Several Obligations; Benefits of the Agreement

.  The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Administrative Agent is authorized to act as such).  The failure of any Lender to perform any of its obligations hereunder shall not relieve any other

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Lender from any of its obligations hereunder.  The Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to the Agreement and their respective successors and assigns.

9.7.

Expenses; Indemnification

.  The Borrower shall reimburse the Administrative Agent for any costs, internal charges and out-of-pocket expenses (including, without limitation, all Appraisal costs, all reasonable fees for consultants and fees and reasonable expenses for attorneys for the Administrative Agent, which attorneys may be employees of the Administrative Agent) paid or incurred by the Administrative Agent in connection with the administration, amendment, modification, and enforcement of the Loan Documents.  The Borrower also agrees to reimburse the Administrative Agent and the Lenders for any reasonable costs, internal charges and out-of-pocket expenses (including, without limitation, all fees and reasonable expenses for attorneys for the Administrative Agent and the Lenders, which attorneys may be employees of the Administrative Agent or the Lenders) paid or incurred by the Administrative Age nt or any Lender in connection with the collection and enforcement of the Loan Documents (including, without limitation, any workout).  The Borrower further agrees to indemnify the Administrative Agent, each Lender and their Affiliates, and their directors, employees, and officers against all losses, claims, damages, penalties, judgments, liabilities and expenses (including, without limitation, all fees and reasonable expenses for attorneys of the indemnified parties, all expenses of litigation or preparation therefore whether or not the Administrative Agent, or any Lender is a party thereto) which any of them may pay or incur arising out of or relating to the Agreement, the other Loan Documents, the Projects, the transactions contemplated hereby or the direct or indirect application or proposed application of the proceeds of any Loan hereunder, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefore. The Borro wer agrees not to assert any claim against the Administrative Agent or any Lender, any of their respective Affiliates, or any of their or their respective Affiliates’ officers, directors, employees, attorneys and agents, on any theory of liability, for consequential or punitive damages arising out of or otherwise relating to any facility hereunder, the actual or proposed use of the Loans or any Letter of Credit, the Loan Documents or the transactions contemplated thereby. The Borrower agrees that during the term of the Agreement, it shall under no circumstances claim, and hereby waives, any right of offset, counterclaim or defense against the Administrative Agent or any Lender with respect to the Obligations arising from, due to, related to or caused by any obligations, liability or other matter or circumstance which is not the Obligations and is otherwise unrelated to the Agreement. Any assignee of a Lender’s interest in and to the Agreement, its Note and the other Loan Documents shall take the sa me free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which the Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by the Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by the Borrower. The obligations of the Borrower under this Section shall survive the termination of the Agreement.

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9.8.

Numbers of Documents

.  All statements, notices, closing documents, and requests hereunder shall be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Lenders.

9.9.

Accounting

.  Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP.

9.10.

Severability of Provisions

.  Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable.

9.11.

Nonliability of Lenders

.  The relationship between the Borrower, on the one hand, and the Lenders and the Administrative Agent, on the other, shall be solely that of borrowers and lender.  Neither the Administrative Agent nor any Lender shall have any fiduciary responsibilities to the Borrower.  Neither the Administrative Agent nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower’s business or operations.

9.12.

CHOICE OF LAW

.  THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

9.13.

CONSENT TO JURISDICTION

.  THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.  NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE ADMINISTRATIVE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION.  ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE ADMINISTRATIVE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE ADMINISTRATIVE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.

9.14.

WAIVER OF JURY TRIAL

.  THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING

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INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

9.15.

USA Patriot Act Notice

.  Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Borrower in accordance with the Act.

ARTICLE X.
THE ADMINISTRATIVE AGENT

10.1.

Appointment

.  KeyBank National Association, is hereby appointed Administrative Agent hereunder and under each other Loan Document, and each of the Lenders irrevocably authorizes the Administrative Agent to act as the agent of such Lender.  The Administrative Agent agrees to act as such upon the express conditions contained in this Article X.  Notwithstanding the use of the defined term “Administrative Agent,” it is expressly understood and agreed that the Administrative Agent shall not have any fiduciary responsibilities to any Lender by reason of the Agreement or any other Loan Document and that the Administrative Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in the Agreement and the other Loan Documents.  In its capacity as the Lenders’ contractual representative, the Administ rative Agent (i) shall perform its duties with respect to the administration of the Facility in the same manner as it does when it is the sole lender under this type of facility but does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a “representative” of the Lenders within the meaning of the term “secured party” as defined in the Illinois Uniform Commercial Code and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in the Agreement and the other Loan Documents.  Each of the Lenders hereby agrees to assert no claim against the Administrative Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each Lender hereby waives, provided that the Administrative Agent shall, in any case, not be released from liability to the Lenders for damages or losses incurred by them as a result of the Administrative Agent’s gross negligence or willful mis conduct.

10.2.

Powers

.  The Administrative Agent shall have and may exercise such powers under the Loan Documents as are specifically delegated to the Administrative Agent by the terms of each thereof, together with such powers as are reasonably incidental thereto.  The Administrative Agent shall have no implied duties to the Lenders, or any obligation to the Lenders to take any action thereunder except any action specifically provided by the Loan Documents to be taken by the Administrative Agent.

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10.3.

General Immunity

.  Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be liable to the Borrower, the Lenders or any Lender for (i) any action taken or omitted to be taken by it or them hereunder or under any other Loan Document or in connection herewith or therewith except for its or their own gross negligence or willful misconduct or, in the case of the Administrative Agent, its breach of an express obligation under the Agreement; or (ii) any determination by the Administrative Agent that compliance with any law or any governmental or quasi-governmental rule, regulation, order, policy, guideline or directive (whether or not having the force of law) requires the Advances and Commitments hereunder to be classified as being part of a “highly leveraged transaction”.

10.4.

No Responsibility for Loans, Recitals, etc

.  Neither the Administrative Agent nor any of its directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (i) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any obligor under any Loan Document, including, without limitation, any agreement by an obligor to furnish information directly to each Lender; (iii) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered to the Administrative Agent; (iv) the validity, effectiveness or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (v) the value, sufficiency, creation, perfection, or priority of any interest in any collatera l security; or (vi) the financial condition of the Borrower.  Except as otherwise specifically provided herein, the Administrative Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Borrower to the Administrative Agent at such time, but is voluntarily furnished by the Borrower to the Administrative Agent (either in its capacity as Administrative Agent or in its individual capacity).

10.5.

Action on Instructions of Lenders

.  The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder and under any other Loan Document in accordance with written instructions signed by the required percentage of the Lenders needed to take such action or refrain from taking such action, and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders.  The Lenders hereby acknowledge that the Administrative Agent shall be under no duty to take any discretionary action permitted to be taken by it pursuant to the provisions of the Agreement or any other Loan Document unless it shall be requested in writing to do so by the Required Lenders.  The Administrative Agent shall be fully justified in failing or refusing to take any action hereunder and under any other Loan Document unless it shall first be indemni fied to its reasonable satisfaction by the Lenders pro rata against any and all liability, cost and expense that it may incur by reason of taking or continuing to take any such action.

10.6.

Employment of Agents and Counsel

.  The Administrative Agent may execute any of its duties as Administrative Agent hereunder and under any other Loan Document by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders, except as to money or securities received by it or its authorized agents, for the default or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.  The Administrative Agent shall be entitled to advice of counsel concerning all matters pertaining to the agency hereby created and its duties hereunder and under any other Loan Document.

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10.7.

Reliance on Documents; Counsel

.  The Administrative Agent shall be entitled to rely upon any Note, notice, consent, certificate, affidavit, letter, telegram, statement, paper or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and, in respect to legal matters, upon the opinion of counsel selected by the Administrative Agent, which counsel may be employees of the Administrative Agent.

10.8.

Administrative Agent’s Reimbursement and Indemnification

.  The Lenders agree to reimburse and indemnify the Administrative Agent ratably in proportion to their respective Commitments (i) for any amounts not reimbursed by the Borrower for which the Administrative Agent is entitled to reimbursement by the Borrower under the Loan Documents, (ii) for any other expenses incurred by the Administrative Agent on behalf of the Lenders, in connection with the preparation, execution, delivery, administration and enforcement of the Loan Documents, if not paid by Borrower and (iii) for any liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Loan Documents or any other document delivered in connection therewith or the transactio ns contemplated thereby (including without limitation, for any such amounts incurred by or asserted against the Administrative Agent in connection with any dispute between the Administrative Agent and any Lender or between two or more of the Lenders), or the enforcement of any of the terms thereof or of any such other documents, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct or a breach of the Administrative Agent’s express obligations and undertakings to the Lenders. The obligations of the Lenders and the Administrative Agent under this Section 10.8 shall survive payment of the Obligations and termination of the Agreement.

10.9.

Rights as a Lender

.  In the event the Administrative Agent is a Lender, the Administrative Agent shall have the same rights and powers hereunder and under any other Loan Document as any Lender and may exercise the same as though it were not the Administrative Agent, and the term “Lender” or “Lenders” shall, at any time when the Administrative Agent is a Lender, unless the context otherwise indicates, include the Administrative Agent in its individual capacity.  The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of trust, debt, equity or other transaction, in addition to those contemplated by the Agreement or any other Loan Document, with the Borrower or any of its Subsidiaries in which the Borrower or such Subsidiaries are not restricted hereby from engaging with any other Person.  The Administrative Agent, in its indiv idual capacity, is not obligated to remain a Lender.

10.10.

Lender Credit Decision

.  Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on the financial statements prepared by the Borrower and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into the Agreement and the other Loan Documents.  Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own

- 81 -

credit decisions in taking or not taking action under the Agreement and the other Loan Documents.

10.11.

Successor Administrative Agent

.  Except as otherwise provided below, KeyBank National Association shall at all times serve as the Administrative Agent during the term of this Facility.  The Administrative Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower, such resignation to be effective upon the appointment of a successor Administrative Agent or, if no successor Administrative Agent has been appointed, forty-five days after the retiring Administrative Agent gives notice of its intention to resign.  The Administrative Agent may be removed at any time with cause (which shall include, without limitation, the Administrative Agent becoming a Defaulting Lender) by written notice received by the Administrative Agent from the Required Lenders (but excluding, for purposes of calculating the percentage needed to constitute Required Lenders in such instance, the Co mmitment of the Administrative Agent from the Aggregate Commitment and the Advances held by the Administrative Agent from the total outstanding Advances), such removal to be effective on the date specified by such Lenders.  Upon any such resignation or removal, the Required Lenders shall have the right to appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent.  If no successor Administrative Agent shall have been so appointed by the Required Lenders within thirty days after the resigning Administrative Agent’s giving notice of its intention to resign, then the resigning Administrative Agent may appoint, on behalf of the Borrower and the Lenders, a successor Administrative Agent.  Notwithstanding the previous sentence, the Administrative Agent may at any time without the consent of the Borrower or any Lender, appoint any of its Affiliates which is a commercial bank as a successor Administrative Agent hereunder.  If the Administrative Agent has resigned or been removed and no successor Administrative Agent has been appointed, the Lenders may perform all the duties of the Administrative Agent hereunder and the Borrower shall make all payments in respect of the Obligations to the applicable Lender and for all other purposes shall deal directly with the Lenders.  No successor Administrative Agent shall be deemed to be appointed hereunder until such successor Administrative Agent has accepted the appointment.  Any such successor Administrative Agent shall be a commercial bank having capital and retained earnings of at least $500,000,000.  Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning or removed Administrative Agent.  Upon the effectiveness of the resignation or removal of the Administrative Agent, the resigning or removed Administrati ve Agent shall be discharged from its duties and obligations hereunder and under the Loan Documents.  After the effectiveness of the resignation or removal of an Administrative Agent, the provisions of this Article X shall continue in effect for the benefit of such Administrative Agent in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent hereunder and under the other Loan Documents.

10.12.

Notice of Defaults

.  If a Lender becomes aware of a Default or Unmatured Default, such Lender shall notify the Administrative Agent of such fact provided that the failure to give such notice shall not create liability on the part of a Lender.  Upon receipt of such notice that a Default or Unmatured Default has occurred or upon it otherwise having actual knowledge

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of any Default or Unmatured Default, the Administrative Agent shall notify each of the Lenders of such fact.

10.13.

Requests for Approval

.  If the Administrative Agent requests in writing the consent or approval of a Lender, such Lender shall respond and either approve or disapprove definitively in writing to the Administrative Agent within ten Business Days (or sooner if such notice specifies a shorter period for responses based on Administrative Agent’s good faith determination that circumstances exist warranting its request for an earlier response) after such written request from the Administrative Agent.  If the Lender does not so respond, that Lender shall be deemed to have approved the request, unless the consent or approval of all Lenders is required for the requested action as provided under Section 8.2, in which event failure to so respond shall not be deemed to be an approval of such request.

10.14.

Defaulting Lenders

.  At such time as a Lender becomes a Defaulting Lender, such Defaulting Lender’s right to vote on matters which are subject to the consent or approval of the Required Lenders, each affected Lender or all Lenders shall be immediately suspended until such time as the Lender is no longer a Defaulting Lender, except that, without the consent of such Lender, (i) the amount of the Commitment of the Defaulting Lender may not be increased, (ii) the Facility Termination Date and the time of payment of any principal or interest due to such Defaulting Lender may not be extended (except as provided in Section 2.1), and (iii) no portion of the principal amount of any Loan due to such Defaulting Lender or accrued interest thereon may be forgiven.  If a Defaulting Lender has failed to fund its pro rata share of any Advance and until such time as such Defaulting Lender subsequ ently funds its pro rata share of such Advance, all Obligations owing to such Defaulting Lender hereunder shall be subordinated in right of payment, as provided in the following sentence, to the prior payment in full of all principal of, interest on and fees relating to the Loans funded by the other Lenders in connection with any such Advance in which the Defaulting Lender has not funded its pro rata share (such principal, interest and fees being referred to as “Senior Loans” for the purposes of this section).  All amounts paid by the Borrower and otherwise due to be applied to the Obligations owing to such Defaulting Lender pursuant to the terms hereof shall be distributed by the Administrative Agent to the other Lenders in accordance with their respective pro rata shares (recalculated for the purposes hereof to exclude the Defaulting Lender) until all Senior Loans have been paid in full.  After the Senior Loans have been paid in full equitable adjustments will be made in connection with future payments by the Borrower to the extent a portion of the Senior Loans had been repaid with amounts that otherwise would have been distributed to a Defaulting Lender but for the operation of this Section 10.14.  This provision governs only the relationship among the Administrative Agent, each Defaulting Lender and the other Lenders; nothing hereunder shall limit the obligation of the Borrower to repay all Loans in accordance with the terms of the Agreement.  The provisions of this section shall apply and be effective regardless of whether a Default occurs and is continuing, and notwithstanding (i) any other provision of the Agreement to the contrary, (ii) any instruction of the Borrower as to its desired application of payments or (iii) the suspension of such Defaulting Lender’s right to vote on matters which are subject to the consent or approval of the Required Lenders or all Lenders.

10.15.

Additional Agents

.  Neither the Co-Documentation Agents nor the Syndication Agent as designated on the cover of the Agreement have any rights or obligations under the

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Loan Documents as a result of such designation or of any actions undertaken in such capacity, such parties having only those rights or obligations arising hereunder in their capacities as a Lender.

ARTICLE XI.
SETOFF; RATABLE PAYMENTS

11.1.

Setoff

.  In addition to, and without limitation of, any rights of the Lenders under applicable law, if the Borrower or any of the Subsidiary Guarantors becomes insolvent, however evidenced, or any Default occurs, any and all deposits (including all account balances, whether provisional or final and whether or not collected or available) and any other Indebtedness at any time held or owing by any Lender or any of its Affiliates to or for the credit or account of the Borrower may be offset and applied toward the payment of the Obligations owing to such Lender at any time prior to the date that such Default has been fully cured, whether or not the Obligations, or any part hereof, shall then be due, provided, however that no such set off or offset shall be permitted if the Administrative Agent, in its reasonable discretion, has a good faith belief that such an offset might impair any othe r remedies available to the Lenders under the Security Documents.

11.2.

Ratable Payments

.  If any Lender, whether by setoff or otherwise, has payment made to it upon its Loans (other than payments of Swingline Loans and payments received pursuant to Sections 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to purchase a portion of the Loans held by the other Lenders so that after such purchase each Lender will hold its ratable proportion of Loans.  If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or such amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral ratably in proportion to their Loans.  In case any such pay ment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

ARTICLE XII.
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

12.1.

Successors and Assigns

.  The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 12.3.  The parties to the Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, (x) any pledge or assignment by any Lender of all or any portion of its rights under the Agreement and any Note to a Federal Reserve Bank or (y) in the case of a Lender which is a fund, any pledge or assignment of all or any portion of its rights under the Agreement and any Note to its t rustee in support of its obligations to its trustee; provided, however, that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties

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thereto have complied with the provisions of Section 12.3.  The Administrative Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3; provided, however, that the Administrative Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person.  Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents.  Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has b een issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan.

12.2.

Participations

.

(i)

Permitted Participants; Effect.  Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks, financial institutions, pension funds, or any other funds or entities (“Participants”) participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents.  In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the holder of any such Note for all purposes under the Loan Documents, all amounts payable by the Borrower unde r the Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents.

(ii)

Voting Rights.  Each Lender shall retain the sole right to approve, without the consent of any Participant, any amendment, modification or waiver of any provision of the Loan Documents other than any amendment, modification or waiver with respect to any Loan or Commitment in which such Participant has an interest which would require consent of all the Lenders pursuant to the terms of Section 8.2 or of any other Loan Document.

(iii)

Benefit of Setoff.  The Borrower agree that each Participant which has previously advised the Borrower in writing of its purchase of a participation in a Lender’s interest in its Loans shall be deemed to have the right of setoff provided in Section 11.1 in respect of its participating interest in amounts owing under the Loan Documents to the same extent as if the amount of its participating interest were owing directly to it as a Lender under the Loan Documents.  Each Lender shall retain the right of setoff provided in Section 11.1 with respect to the amount of participating interests sold to each Participant, provided that such Lender and Participant may not each setoff amounts against

- 85 -

the same portion of the Obligations, so as to collect the same amount from the Borrower twice.  The Lenders agree to share with each Participant, and each Participant, by exercising the right of setoff provided in Section 11.1, agrees to share with each Lender, any amount received pursuant to the exercise of its right of setoff, such amounts to be shared in accordance with Section 11.2 as if each Participant were a Lender.

12.3.

Assignments

.

(i)

Permitted Assignments.  Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time assign to any Eligible Assignee, without any approval from the Borrower except as provided in the definition thereof (any such assignees being referred to herein as “Purchasers”), all or any portion (greater than or equal to $5,000,000 for each assignee, so long as the hold position of the assigning Lender is not less than $5,000,000) of its rights and obligations under the Loan Documents.  Notwithstanding the foregoing, no approval of the Borrower shall be required for any such assignment if a Default has occurred and is then continuing.  Such assignment shall be substantially in the form of Exhibit J hereto or in such other form as may be agreed to by the parties thereto.  The consent of the A dministrative Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof or fund related thereto.  Such consent shall not be unreasonably withheld or delayed.

(ii)

Effect; Effective Date.  Upon (i) delivery to the Administrative Agent of a notice of assignment, substantially in the form attached as Exhibit “I” to Exhibit J hereto (a “Notice of Assignment”), together with any consents required by Section 12.3.1, and (ii) payment of a $3,500 fee by the assignor or assignee to the Administrative Agent for processing such assignment, such assignment shall become effective on the effective date specified in such Notice of Assignment.  The Notice of Assignment shall contain a representation by the Purchaser to the effect that none of the consideration used to make the purchase of the Commitment and Loans under the applicable assignment agreement are “plan assets” as defined under ERISA and that the rights and interests of the Purchaser in and under the Loan Document s will not be “plan assets” under ERISA.  On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to the Agreement and any other Loan Document executed by the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Administrative Agent shall be required to release the transferor Lender, and the transferor Lender shall automatically be released on the effective date of such assignment, with respect to the percentage of the Aggregate Commitment and Loans assigned to such Purchaser.  Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor Lender, the Administrative Agent and the Borrower shall make appropriate

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arrangements so that replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting its Commitment, as adjusted pursuant to such assignment.

12.4.

Dissemination of Information

.  The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a “Transferee”) and any prospective Transferee any and all information in such Lender’s possession concerning the creditworthiness of the Borrower and its Subsidiaries, subject to Section 9.11 of the Agreement.

12.5.

Tax Treatment

.  If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 3.5.

ARTICLE XIII.
NOTICES

13.1.

Giving Notice

.  Except as otherwise permitted by Section 2.14 with respect to borrowing notices, all notices and other communications provided to any party hereto under the Agreement or any other Loan Document shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below its signature hereto or at such other address (or to counsel for such party) as may be designated by such party in a notice to the other parties.  Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by telex or facsimile, shall be deemed given when transmitted (answerback confirmed in the case of telexes).

13.2.

Change of Address

.  The Borrower, the Administrative Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto.

ARTICLE XIV.
COUNTERPARTS

This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart.  This Agreement shall be effective when it has been executed by the Borrower, the Administrative Agent and the Lenders and each party has notified the Administrative Agent, either by electronic transmission by email with a pdf copy or other electronic reproduction of an executed page attached or by telephone, that it has taken such action.

(Remainder of page intentionally left blank.)

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IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent have executed this Agreement as of the date first above written.

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

By:

Print Name:  Steven P. Grimes

Title:

 President and Chief Executive Officer

2901 Butterfield Road

Oak Brook, IL  60523

Phone:  630-218-8000

Facsimile:  630-368-2308

Attention:  Steven P. Grimes

with a copy to:

2901 Butterfield Road

Oak Brook, IL  60523

Phone:  630-368-2861

Facsimile:  630-586-6446

Attention:  Dennis Holland

Signature Page to Credit Agreement

S-88

TERM COMMITMENT:

$19,230,769

REVOLVING COMMITMENT:

$55,769,231

KEYBANK NATIONAL ASSOCIATION,
Individually and as Administrative Agent

By:

Print Name:  Kevin P. Murray

Title:  Senior Vice President

KeyBank Real Estate Capital

1200 Abernathy Road NE, Suite 1550

Atlanta, GA  30328

Phone:  770-510-2168

Facsimile:  770-510-2195

Attention:  Kevin P. Murray

Signature Page to Credit Agreement

S-89

TERM COMMITMENT:

$19,230,769

REVOLVING COMMITMENT:

$55,769,231

JPMORGAN CHASE BANK, N.A., individually

and as Syndication Agent

By:

Print Name:  Carrie A. Reichert

Title:  Senior Credit Banker

10 South Dearborn, 19^th Floor

Chicago, IL  60603

Phone:  312-325-5031

Facsimile:  312-325-5174

Attention:  Carrie A. Reichert

Signature Page to Credit Agreement

S-90

TERM COMMITMENT:

$19,230,769

REVOLVING COMMITMENT:

$55,769,231

DEUTSCHE BANK TRUST COMPANY OF

AMERICAS, as Lender

By:

Print Name:

Title:

By:

Print Name:

Title:

George Reynolds, Director

Deutsche Bank Securities Inc.

60 Wall Street, 10^th Floor

New York, New York 10005

Phone:  212-250-2362

Facsimile:  212-797-4496

DEUTSCHE BANK SECURITIES INC., as
Co-Documentation Agent

By:

Print Name:

Title:

By:

Print Name:

Title:

Signature Page to Credit Agreement

S-91

TERM COMMITMENT:

$19,230,769

REVOLVING COMMITMENT:

$55,769,231

CITIBANK, N.A., individually as

Co-Documentation Agent

By:

Print Name:  John Rowland

Title:  Director

388 Greenwich Street

23^rd Floor

New York, NY  10013

Phone:  212-816-3784

Facsimile:  866-421-9138

Attention:  David Smith, Vice President

Signature Page to Credit Agreement

S-92

TERM COMMITMENT:

$12,820,513

REVOLVING COMMITMENT:

$37,179,487

ROYAL BANK OF CANADA, as Lender

By:

Name:

 David Cole

Title:

One Liberty Plaza

New York, NY  10006-1004

Phone:  212-428-6404

Facsimile:  212-428-6460

RBC CAPITAL MARKETS, as Co-Documentation Agent

By:

Name:

 _________________________________

Title:

Signature Page to Credit Agreement

S-93

TERM COMMITMENT:

$3,846,154

REVOLVING COMMITMENT:

$11,153,846

RBC BANK (USA)

By:

Name:

 Richard Marshall

Title:  Market Executive - National Division

301 Fayetteville Street, Suite 1100

Raleigh, NC  27613

Phone:  919-788-5749

Facsimile:  919-788-5515

Signature Page to Credit Agreement

S-94

TERM COMMITMENT:

$12,820,513

REVOLVING COMMITMENT:

$37,179,487

NORDDEUTSCHE LANDESBANK

GIROZENTRALE, NEW YORK BRANCH

By:

Print Name:  Dirk Ziemer

Title:  Senior Director

By:

Print Name:  Lita Kot

Title:  Director

1114 Avenue of the Americas

20th Floor

New York, NY  10036

Phone:  212-812-6923

Facsimile:  212-812-6850

Attention:

Real Estate Finance

Signature Page to Credit Agreement

S-95

TERM COMMITMENT:

$12,820,513

REVOLVING COMMITMENT:

$37,179,487

BANK OF AMERICA, N.A.

By:

Print Name:  Michael W. Edwards

Title:  Senior Vice President

135 South LaSalle Street

IL4-135-12-25

Chicago, IL  60603

Phone:  312-828-4416

Facsimile:  312-537-6740

Attention:  Asad Rafiq

Signature Page to Credit Agreement

S-96

TERM COMMITMENT:

$12,820,513

REVOLVING COMMITMENT:

$37,179,487

BANK OF MONTREAL, CHICAGO BRANCH

By:

Print Name:  Aaron Lanski

Title:  Director

111 West Monroe Street, 5E

Chicago IL  60603

Phone:  312-461-6364

Facsimile:  312-293-8409

Signature Page to Credit Agreement

S-97

TERM COMMITMENT:

$10,256,410

REVOLVING COMMITMENT:

$29,743,590

REGIONS BANK

By:

Print Name:  Joe Samford

Title:  Senior Vice President

1600 North Dallas Parkway, Suite 100

Dallas, TX  75248

Phone:

  972-738-5025

Facsimile:  972-738-5028

Attention:  Barrett Vawter, Vice President

Signature Page to Credit Agreement

S-98

TERM COMMITMENT:

$  7,692,308

REVOLVING COMMITMENT:

$22,307,692

UNION BANK, N.A.

By:

Print Name:  Andrew Romanosky

Title:  Vice President

222 West Adams Street, Suite 1850

Chicago, IL  60606

Phone:  312-601-3945

Facsimile:  312-601-3955

Signature Page to Credit Agreement

S-99

EXHIBIT A

APPLICABLE MARGINS

The interest due hereunder with respect to the Advances shall vary from time to time and shall be determined by reference to the Type of Advance and the then-current Leverage Ratio.  Any such change in the Applicable Margin shall be made on the fifth (5^th) day subsequent to the date on which the Administrative Agent receives a compliance certificate pursuant to Section 6.1(v) with respect to the preceding fiscal quarter of Borrower, provided that the Administrative Agent does not object to the information provided in such certificate. In the event any such compliance certificate is not delivered by Borrower when due under Section 6.1(v) the Administrative Agent shall have the right, if so directed by the Majority Lenders, to increase the Applicable Margins to the next higher level until such c ompliance certificate is delivered, by delivering written notice thereof to Borrower. Such changes shall be given prospective effect only, and no recalculation shall be done with respect to interest or Facility Letter of Credit Fees accrued prior to the date of such change in the Applicable Margin.  If any such compliance certificate shall later be determined to be incorrect and as a result a higher Applicable Margin should have been in effect for any period, Borrower shall pay to the Administrative Agent for the benefit of the Lenders all additional interest and fees which would have accrued if the original compliance certificate had been correct, as shown on an invoice to be prepared by the Administrative Agent and delivered to Borrower, on the next Payment Date following delivery of such invoice.  The per annum Applicable Margins that will be either added to the Alternate Base Rate to determine the Floating Rate or added to LIBOR Base Rate (as adjusted for any Reserve Requirement) to determine t he LIBOR Rate for any LIBOR Interest Period shall be determined as follows:

Leverage Ratio	LIBOR Applicable Margin	ABR Applicable Margin
< 50%	2.75%	1.75%
> 50%, < 55%	3.00%	2.00%
> 55%, < 60%	3.25%	2.25%
> 60%, < 65%	3.50%	2.50%
> 65%, < 67.5%	4.00%	3.00%

A-1

EXHIBIT B

FORM OF NOTE

February __, 2011

Inland Western Retail Real Estate Trust, Inc., a corporation organized under the laws of the State of Maryland (the “Borrower”), promises to pay to the order of ____________________ (the “Lender”) the aggregate unpaid principal amount of all Loans made by the Lender to the Borrower pursuant to Article II of the Amended and Restated Credit Agreement, dated as of the date hereof among the Borrower, KeyBank National Association, individually and as Administrative Agent, and the other Lenders named therein (as the same may be amended or modified, the “Agreement”) hereinafter referred to, in immediately available funds at the main office of KeyBank National Association in Cleveland, Ohio, as Administrative Agent, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Agreement.  The Borrow er shall pay remaining unpaid principal of and accrued and unpaid interest on the Loans in full on the Facility Termination Date or such earlier date as may be required under the Agreement.

The Lender shall, and is hereby authorized to, record on the schedule attached hereto, or to otherwise record in accordance with its usual practice, the date and amount of each Loan and the date and amount of each principal payment hereunder.

This Note is one of the Notes issued pursuant to, and is entitled to the benefits of, the Agreement, as it may be amended from time to time, reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated.  Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Agreement.

If there is a Default under the Agreement or any other Loan Document and Administrative Agent exercises the remedies provided under the Agreement and/or any of the Loan Documents for the Lenders, then in addition to all amounts recoverable by the Administrative Agent and the Lenders under such documents, the Administrative Agent and the Lenders shall be entitled to receive reasonable attorneys fees and expenses incurred by the Administrative Agent and the Lenders in connection with the exercise of such remedies.

Borrower and all endorsers severally waive presentment, protest and demand, notice of protest, demand and of dishonor and nonpayment of this Note, and any and all lack of diligence or delays in collection or enforcement of this Note, and expressly agree that this Note, or any payment hereunder, may be extended from time to time, and expressly consent to the release of any party liable for the obligation secured by this Note, the release of any of the security for this Note, the acceptance of any other security therefore, or any other indulgence or forbearance whatsoever, all without notice to any party and without affecting the liability of the Borrower and any endorsers hereof.

This Note shall be governed and construed under the internal laws of the State of Illinois.

B-1

BORROWER AND LENDER, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS NOTE AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A JUDGE AND NOT BEFORE A JURY.

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

By:

Print Name:  Steven P. Grimes

Title:  President and Chief Executive Officer

2901 Butterfield Road

Oak Brook, Illinois  60523

Phone:  630-218-8000

Facsimile:  630-218-4955

Attention:  Steven P. Grimes

B-2

SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.,

DATED FEBRUARY __, 2011

Maturity

Principal

Maturity

Principal

Amount of

of Interest

Amount

Unpaid

Date

Loan         

Period       

Paid        

Balance

B-3

EXHIBIT C

AMENDMENT REGARDING INCREASE

This Amendment to Credit Agreement (the “Amendment”) is made as of __________, 20__, by and among Inland Western Retail Real Estate Trust, Inc. (the “Borrower”), KeyBank National Association, as “Administrative Agent,” and one or more existing or new “Lenders” shown on the signature pages hereof.

R E C I T A L S

A.

Borrower, Administrative Agent and certain other Lenders have entered into an Amended and Restated Credit Agreement dated as of February 4, 2011 (as amended, the “Credit Agreement”).  All capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Credit Agreement.

B.

Pursuant to the terms of the Credit Agreement, the Lenders initially agreed to provide Borrower with Revolving Commitments in an aggregate principal amount of up to $350,000,000.  Borrower and the Agent on behalf of the Lenders now desire to amend the Credit Agreement in order to, among other things (i) increase the aggregate Revolving Commitments to $___________; and (ii) admit [name of new banks] as “Lenders” under the Credit Agreement.

NOW, THEREFORE, in consideration of the foregoing Recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENTS

1.

The foregoing Recitals to this Amendment hereby are incorporated into and made part of this Amendment.

2.

From and after _________, ____ (the “Effective Date”) (i) [name of new banks] shall be considered as “Lenders” under the Credit Agreement and the Loan Documents, and (ii) [name of existing Lenders] shall each be deemed to have increased its Commitment to the amount shown next to their respective signatures on the signature pages of this Amendment, each having a Revolving Commitment in the amount shown next to their respective signatures on the signature pages of this Amendment.  Borrower shall, on or before the Effective Date, execute and deliver to each new Lender a Note to evidence the Loans to be made by such Lender.

3.

From and after the Effective Date, the aggregate Revolving Commitments shall equal __________ Million Dollars ($___,000,000).

4.

For purposes of Section 13.1 of the Credit Agreement (Giving Notice), the address(es) and facsimile number(s) for [name of new banks] shall be as specified below their respective signature(s) on the signature pages of this Amendment.

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5.

Borrower hereby represents and warrants that, as of the Effective Date, there is no Default or Unmatured Default, the representations and warranties contained in Article V of the Credit Agreement are true and correct in all material respects as of such date and Borrower has no offsets or claims against any of the Lenders.

6.

As expressly modified as provided herein, the Credit Agreement shall continue in full force and effect.

7.

This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Amendment by signing any such counterpart.

(Remainder of page intentionally left blank.)

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IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first written above.

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland corporation

By:

Print Name:

Title:

KEYBANK NATIONAL ASSOCIATION,

as Administrative Agent

By:

Print Name:

Title:

[NAME OF NEW LENDER]

By:

Print Name:

Title:

Phone:

Facsimile:

Attention:

Amount of Commitment:

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EXHIBIT D

COMPLIANCE CERTIFICATE

KeyBank National Association, as Administrative Agent

127 Public Square

Cleveland, Ohio  44114

Re: Amended and Restated Credit Agreement dated February 4, 2011 (as amended, modified, supplemented, restated, or renewed, from time to time, the “Agreement”) between INLAND WESTERN RETAIL REAL ESTATE TRUST, INC. (the “Borrower”), and KEYBANK NATIONAL ASSOCIATION, as Administrative Agent for itself and the other lenders parties thereto from time to time (“Lenders”).

Reference is made to the Agreement.  Capitalized terms used in this Certificate (including schedules and other attachments hereto, this “Certificate”) without definition have the meanings specified in the Agreement.

Pursuant to applicable provisions of the Agreement, Borrower hereby certifies to the Lenders that the information furnished in the attached schedules, including, without limitation, each of the calculations listed below are true, correct and complete in all material respects as of the last day of the fiscal periods subject to the financial statements and associated covenants being delivered to the Lenders pursuant to the Agreement together with this Certificate (such statements the “Financial Statements” and the periods covered thereby the “reporting period”) and for such reporting periods.

The undersigned hereby further certifies to the Lenders that:

1.

Compliance with Financial Covenants.  Schedule A attached hereto sets forth financial data and computations evidencing the Borrower’s compliance with certain covenants of the Agreement, all of which data and computations are true, complete and correct.

2.

Review of Condition.  The undersigned has reviewed the terms of the Agreement, including, but not limited to, the representations and warranties of the Borrower set forth in the Agreement and the covenants of the Borrower set forth in the Agreement, and has made, or caused to be made under his or her supervision, a review in reasonable detail of the transactions and condition of the Borrower through the reporting periods.

3.

Representations and Warranties.  To the undersigned’s actual knowledge, the representations and warranties of the Borrower contained in the Loan Documents, including those contained in the Agreement, are true and accurate in all material respects as of the date hereof and were true and accurate in all material respects at all times during the reporting period except as expressly noted on Schedule B hereto.

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4.

Covenants.  To the undersigned’s actual knowledge, during the reporting period, the Borrower observed and performed all of the respective covenants and other agreements under the Agreement and the Loan Documents, and satisfied each of the conditions contained therein to be observed, performed or satisfied by the Borrower, except as expressly noted on Schedule B hereto.

5.

No Unmatured Default.  To the undersigned’s actual knowledge, no Default or Unmatured Default exists as of the date hereof or existed at any time during the reporting period, except as expressly noted on Schedule B hereto.

IN WITNESS WHEREOF, this Certificate is executed by the undersigned this ___ day of _______________, 201__.

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

By:

Name:Title:

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SCHEDULE A TO COMPLIANCE CERTIFICATE

COMPLIANCE CALCULATION METHOD

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SCHEDULE B TO COMPLIANCE CERTIFICATE

EXCEPTIONS, IF ANY

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EXHIBIT E

ENVIRONMENTAL INVESTIGATION SPECIFICATIONS AND PROCEDURES

Phase I Environmental Site Assessments to be prepared in accordance with the ASTM Standard Practice for Environmental Site Assessments:  Phase I Environmental Site Assessment Process (ASTM Designation E1527-94), a summary of which follows:

This ASTM practice is generally considered the industry standard for conducting a Phase I Environmental Site Assessment (ESA).  The purpose of this standard is to “define good commercial and customary practice in the Untied States of America for conducting an ESA of a parcel of commercial real estate with respect to the range of contaminants within the scope of the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and petroleum products.”  The ASTM Phase I ESA is intended to permit a user to satisfy one of the requirements to qualify for the innocent landowner defense to CERCLA liability; that is, the practice that constitutes “all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practices” as defined in 42 USC 9601(35)(B).

The goal of the ASTM Phase I ESA is to identify “recognized environmental conditions.”  Recognized environmental conditions means the presence or likely presence of any hazardous substances or petroleum products on a property under conditions that indicate an existing release, a past release, or a material threat of a release of any hazardous substances or petroleum products into structures on the property or into the ground, groundwater, or surface water of the property.  The term includes hazardous substances or petroleum products even under conditions in compliance with laws.  The term is not intended to include de minimus conditions that generally would not be the subject of an enforcement action if brought to the attention of appropriate governmental agencies.

The ASTM standard indicates that a Phase I ESA should consist of four main components:  1) Records Review; 2) Site Reconnaissance; 3) Interviews; and 4) Report.  The purpose of the records review is to obtain and review records that will help identify recognized environmental conditions in connection with the property.  The site reconnaissance involves physical observation of the property’s exterior and interior, as well as an observation of adjoining properties.  Interviews with previous and current owners and occupants, and local government officials provides insight into the presence or absence of recognized environmental conditions in connection with the property.  The final component of the ESA, the report, contains the findings of the ESA and conclusions regarding the presence or absence of recognized environmental conditions in connection wi th the property.  It includes documentation to support the analysis, opinions, and conclusions found in the report.

While the use of this practice is intended to constitute appropriate inquiry for purposes of CERCLA’s innocent landowner defense, it is not intended that its use be limited to that purpose.  The ASTM standard is intended to be an approach to conducting an inquiry designed to identify recognized environmental conditions in connection with a property, and environmental site assessments.

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EXHIBIT F

FORM OF OPINION OF BORROWER’S COUNSEL

February 4, 2011

KeyBank National Association,

as Administrative Agent for the Lenders

127 Public Square, 8^th Floor

Cleveland, Ohio 44114

Re:

Amended and Restated Credit Agreement dated as of February 4, 2011 (the “Credit Agreement”) by and among Inland Western Retail Real Estate Trust, Inc., a corporation organized under the laws of the State of Maryland (the “Borrower”), KeyBank National Association, a national banking association, and the several banks, financial institutions and other entities from time to time parties to the Credit Agreement (collectively, the “Lenders”) and KeyBank National Association, not individually, but as “Administrative Agent”

Ladies and Gentlemen:

We have acted as special counsel to the Borrower and the guarantors identified on Schedule 1, attached hereto and incorporated herein (each a “Subsidiary Guarantor”, and collectively the “Subsidiary Guarantors”), in connection with the Credit Agreement.  Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned thereto in the Credit Agreement.

We have reviewed the Credit Agreement, the Subsidiary Guaranty and the Notes (collectively, the “Loan Documents”).

For purposes hereof, we have made certain assumptions hereinafter described without independent verification.  We have also assumed, without independent verification, that there are no facts inconsistent with the assumptions hereinafter set forth.  We know of no facts inconsistent with such assumptions, but we have not conducted an independent investigation or verification.

The opinion set forth herein is qualified as stated herein and is qualified further by the following:

A.

This opinion is based upon existing laws, ordinances and regulations in effect as of the date hereof and as they presently apply.

B.

In rendering the opinion set forth below, we have relied as to matters of fact, upon (i) certificates or statements of public officials (including Certificates of Good Standing and

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Existence in Illinois and Maryland for Borrower each dated January 5, 2011, and the Certificate of Good Standing and Existence in Delaware or Illinois, as applicable, for each Subsidiary Guarantor as set forth on Schedule 1 hereof, the validity of which we assume remains unchanged as of the date hereof) and of officers of the Borrower and each Subsidiary Guarantor and (ii) representations and warranties contained in the Loan Documents.  Further, we have assumed that (a) each document submitted to us is accurate and complete, (b) there are no events, facts or circumstances currently and actually known to the Borrower, the Subsidiary Guarantors or the Lenders which have not been disclosed to us to the extent such events, facts or circumstances would render any provision of the Loan Documents invalid or unenforceable in any material respect, and (c) there are and have been no agreements o r understandings among the Borrower, the Subsidiary Guarantors and the Lenders, written or oral, and there is and has been no usage of trade or course of prior dealing among such parties that in either case would materially define, supplement, amend or qualify the terms of the Loan Documents so as to render inaccurate any opinion expressed herein.  For purposes of rendering the first three opinions expressed below, we have relied exclusively upon certificates issued by governmental authorities in the relevant jurisdictions, and such opinions are not intended to provide any conclusion or assurance beyond that conveyed by such certificates.

C.

We express no opinion as to the enforceability, under certain circumstances, of provisions imposing penalties or forfeitures, late payment charges or an increase in interest rate upon delinquency in payment or the occurrence of a default.

D.

We express no opinion as to:

(i)

the existence of any Person’s ownership rights in or title to, the existence or priority of, any lien or with respect to any property;

(ii)

any agreement by the Borrower or any Subsidiary Guarantor to waive jury trial or appoint an agent for acceptance of service of process;

(iii)

any provision of the Loan Documents purporting to waive any objection to the laying of venue or any claim that an action or proceeding has been brought in an inconvenient forum; and

(iv)

any provision of the Loan Documents which authorizes or permits any purchaser of a participation interest from any party to set off or apply any deposit or property or any indebtedness with respect to any participation interest.

E.

We have assumed that (i) the transactions contemplated by the Loan Documents are within the Lenders’ corporate powers; (ii) the Lenders, the Borrower and the Subsidiary Guarantors have been in compliance with all applicable laws, rules and regulations governing and affecting the conduct of their respective businesses to the extent that non-compliance would have a material adverse effect on the validity or enforceability of any of the Loan Documents; (iii) the Loan Documents will be enforced in good faith and in circumstances and in a manner that are commercially reasonable; (iv) the Lenders are not subject to any statute, rule or regulation or any impediment that requires them to obtain the authorization, approval or

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consent of, or to make any declaration or filing with, any governmental authority or regulatory body, or all of such authorizations, approvals or filings have been obtained or made, in connection with (A) the transactions contemplated by the Loan Documents or (B) the due execution, delivery, recordation, consummation and undertaking of the performance of the Loan Documents or (C) the exercise of  any rights and remedies under the Loan Documents; (v) all filings or actions necessary in connection with or for the effectiveness of the transactions contemplated by the Loan Documents with any governmental authority or regulatory body have been or will be made with the appropriate governmental authority or regulatory body and in accordance the requirements of all applicable laws, codes, ordinances and regulations (including without limitation the payment of all fees in connection therewith); and (vi) all material terms, provisions and conditions relating to the transactions contemplated by the Loan Documents are correctly and completely reflected in the Loan Documents.

F.

The opinion hereafter expressed is qualified to the extent that: (i) the characterization of, and the enforceability of any rights or remedies in, any agreement or instrument may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer, equitable subordination, or similar laws and doctrines affecting the rights of creditors generally and general equitable principles; (ii) the availability of specific performance, injunctive relief or any other equitable remedy is subject to the discretion of a court of competent jurisdiction; and (iii) the provisions of the Loan Documents that (a) may require indemnification or contribution with respect to the negligence or wrongful conduct of the indemnified party or its representatives or agents, (b) purports to confer, waive or consent to the jurisdiction of any c ourt, or (c) waives any right granted by common or statutory law, may be unenforceable as against public policy.

G.

Requirements in the Loan Documents specifying that provisions thereof only may be waived in writing may not be valid, binding or enforceable to the extent that an oral agreement or an implied agreement by trade practice or course of conduct has been created modifying any provision of the Loan Documents.

H.

We express no opinion on provisions in the Loan Documents that provide for the waiver of the statute of limitations, waiver of the right to bring counterclaims, the appointment of any party as attorney-in-fact, the waiver of the right to assert lack of consideration, or the waiver of the requirements of good faith and fair dealing, notice and commercial reasonableness to the extent such requirements cannot be waived by consent.  We further advise that the amount of attorneys’ fees are subject to the discretion of the court before which any proceeding involving the Loan Documents may be brought.

I.

We have not undertaken any independent review of the effect upon the Loan Documents and the transactions contemplated thereby of any applicable state or federal environmental, securities or taxation law, code or regulation, and we render no opinion with respect to any of the foregoing.

J.

We have assumed that: (i) each of the Lenders is duly organized and validly existing and in good standing under applicable state or federal laws; (ii) the execution and delivery of the Loan Documents and the undertaking of the performance by the Lenders of their

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respective obligations thereunder do not contravene (a) their organizational documents, including the articles of association and any amendments thereto, or Bylaws, including all amendments thereto, or (b) any law or contractual restriction affecting the Lenders or their respective properties; and (iii) there is no pending action or proceeding before any court, governmental agency or arbitrator against or directly involving the Lenders, and there is no threatened action or proceeding affecting the Lenders or any of the assets of the Lenders before any court, governmental agency or arbitrator which, in any case, would affect the validity or enforceability of any of the Loan Documents.

K.  Whenever our opinion, with respect to the existence or absence of facts, is qualified by the phrase “to our knowledge” or a phrase of similar import, it indicates that no information has come to the attention of Drew J. Scott, Esq., the attorney who has provided substantive legal representation to the Borrower and the Subsidiary Guarantors with respect to the Loan Documents, which would give us current actual knowledge that is inconsistent with the existence or absence of facts qualified by such phrase.  However, except to the extent expressly set forth herein, we have not undertaken any independent investigation to determine, or otherwise attempted to verify, the existence or absence of such facts, and no inference as to our knowledge of the existence or absence of such facts should be drawn from the fact of our representation of the Borrower and the Su bsidiary Guarantors or any other matter.  Only the actual knowledge of the attorney who has worked on this matter for us as described above shall be imputed or ascribed to us in our capacity as counsel.

L.

We render no opinion with respect to the validity or enforceability under Illinois law of any provision of any of the Loan Documents which provides for the compounding of interest or the payment or accrual of interest on interest.  Please note that the Illinois Supreme Court has held in Bowman v. Neely, 151 Ill. 37 (1894) and 137 Ill. 443 (1891) and its progeny that compounding of interest and charging interest on interest are contrary to the public policy of the State of Illinois.

We have investigated such questions of law as in our judgment are necessary or appropriate to enable us to render the opinion expressed below. In addition, we have assumed (i) the genuineness of the signatures of, and the authority of, persons signing all documents in connection with which this opinion is expressed other than the Borrower and the Subsidiary Guarantors, (ii) the legal capacity of natural persons, and (iii) that the Loan Documents constitute the legal, valid and binding obligations of all parties thereto other than the Borrower and the Subsidiary Guarantors.

Based upon the foregoing and subject to the assumptions, limitations and qualifications set forth herein, we are of the following opinion:

1.

The Borrower is a Maryland corporation, duly organized and validly existing and authorized to transact business under the laws of the State of Maryland and is qualified to transact business in the State of Illinois.  Each Subsidiary Guarantor identified in numbers 1 through 33, inclusive, on Schedule 1 hereof, is a limited liability company, duly organized and validly existing and authorized to transact business under the laws of the State of Delaware.  Each Subsidiary Guarantor identified in numbers 34 through 37, inclusive, on Schedule 1

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hereof, is a limited partnership, duly formed and validly existing and authorized to transact business under the laws of the State of Illinois.  The Subsidiary Guarantor identified in number 38 on Schedule 1 hereof, is a statutory trust, duly formed and validly existing and authorized to transaction business under the laws of the State of Delaware.

2.

The execution, delivery and undertaking of performance by the Borrower and the consummation of the transactions contemplated by the Loan Documents to which it is a party are within the corporate powers of the Borrower, have been duly authorized by all necessary corporate action (including any necessary shareholder or stockholder action, if any) of the Borrower, and do not and will not (a) conflict with or result in a breach of any of the provisions of the certificate or articles of incorporation or certificate of existence, as applicable, and bylaws of the Borrower, or (b) to our knowledge, result in a breach or violation of or constitute a default under (x) any contractual obligation to which the Borrower is a party or by which the Borrower or its properties are bound or (y) any writ, order, judgment or decree of any governmental authority or (z) any law, r egulation, ruling or order binding on the Borrower.

3.

The execution, delivery and undertaking of performance by the Subsidiary Guarantors and the consummation of the transactions contemplated by the Subsidiary Guaranty are within the corporate, company or trust powers of the Subsidiary Guarantors, as applicable, have been duly authorized by all necessary limited liability company, partnership or trust action, as applicable (including any necessary member, manager, partner or trustee action, if any), of the Subsidiary Guarantors, and do not and will not (a) conflict with or result in a breach of any of the provisions of the articles of formation, limited partnership certificate, certificate of trust or certificate of existence, as applicable, and operating agreement, limited partnership agreement or trust agreement of any Subsidiary Guarantor, as applicable, or (b) to our knowledge, result in a breach or violation of or c onstitute a default under (x) any contractual obligation to which any Subsidiary Guarantor is a party or by which any Subsidiary Guarantor or its properties are bound, other than the Credit Agreement, or (y) any writ, order, judgment or decree of any governmental authority or (z) any law, regulation, ruling or order binding on any Subsidiary Guarantor.

4.

The Borrower has duly executed and delivered the Loan Documents to which it is a named party.  The Loan Documents constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms.

5.

The Subsidiary Guarantors have duly executed and delivered the Subsidiary Guaranty.  The Subsidiary Guaranty constitutes the legal, valid and binding obligation of the Subsidiary Guarantors, enforceable in accordance with its terms.

6.

To our knowledge, no authorization, consent or approval or other action by, and no notice to or filing with, any governmental authority or other Person is required to be obtained or made by the Borrower for the due execution, delivery and performance by the Borrower of the Loan Documents to which it is a named party, except such as have been duly obtained or made and are in full force and effect.

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7.

Based solely upon a search of our docket and the representations and warranties of the Borrower contained in the Loan Documents , there are no actions, suits, or proceedings pending or threatened against the Borrower before any court or governmental entity or instrumentality which could reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement).

8.

The Loan Documents are governed by the laws of the State of Illinois, and the Loan, including the interest rate reserved in the Notes and all fees and charges paid or to be paid by or on behalf of Borrower in connection with such Loan pursuant to the applicable Loan Documents, is not in violation of the usury laws of the State of Illinois.

While we are not members of the Bar of the State of Maryland or the Bar of the State of Delaware, we have reviewed provisions of the Maryland General Corporation Law (the “Maryland Corporation Law”), the Delaware Limited Liability Company Act (the “Delaware LLC Act”) and the Delaware Statutory Trust Act (the “DST Act”).  We are members of the Bar of the State of Illinois, and we express no opinion herein as to any laws, codes, ordinances or regulations or the effects thereof upon the Loan Documents or the transactions contemplated thereby, other than the Maryland Corporation Law (as to the organization and existence of the Borrower under the laws of the State of Maryland) and the Delaware LLC Act and the DST Act (together, as to the organization and existence of the Subsidiary Guarantors under the laws of the State of Delaware, as applicable), the laws, codes, ordinances and regula tions of the State of Illinois and the federal laws of the United States of America.  The opinions expressed herein are limited in all respects to applicable law as existing on the date hereof.  In rendering this opinion, we do not undertake to advise you of any change in any applicable law or any fact that may occur after the date hereof.

[Signature page follows]

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We call your attention to the fact that, although we represent the Borrower in connection with the Loan Documents and the transactions contemplated thereby, our engagement has been limited to specific matters as to which we have been consulted.  This opinion is limited to the matters stated herein, and we do not express any opinion, either implicitly or otherwise, on any issue not expressly addressed herein.  We disavow any obligation to update or supplement this opinion in response to subsequent changes in the law or future events or circumstances or to advise you of any changes in our opinion in the event additional or newly discovered information is brought to our attention.  This opinion is provided to you as a legal opinion only and not as a guaranty or warranty of the matters discussed herein or in the documents referred to herein.  No opinion may be inferred or implied beyond the matters expressly sta ted herein, and no portion of this opinion may be quoted or in any other way published without the prior written consent of the undersigned.  Further, this opinion may be relied upon only by the addressee hereof.  Without our prior written consent, this opinion may not be: (a) relied upon by you for any purpose other than that stated and set forth in this opinion; or (b) relied upon by any other person or entity for any purpose other than permitted successors, assigns and participants under the Loan Documents.

Very truly yours,

SCOTT & KRAUS, LLC

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Schedule 1

Subsidiary Guarantors

Entity Name	Certificates of Good Standing
1. Inland Western Atlanta Cascade Avenue, L.L.C., a Delaware limited liability company	Delaware – January 24, 2011 Georgia – January 24, 2011
2. Inland Western Iowa City Alexander, L.L.C., a Delaware limited liability company	Delaware – January 24, 2011 Iowa – January 24, 2011
3. Inland Western Mesa Fiesta, L.L.C., a Delaware limited liability company	Delaware – January 24, 2011 Arizona – January 24, 2011
4. Inland Western New Britain Main, L.L.C., a Delaware limited liability company	Delaware – January 24, 2011 Connecticut – January 24, 2011
5. Inland Western Phoenix 19th Avenue, L.L.C, a Delaware limited liability company	Delaware – January 24, 2011 Arizona – January 24, 2011
6. Inland Western RC-I GP, LLC, a Delaware limited liability company	Delaware – January 20, 2011
7. Inland Western RC-I LP, LLC, a Delaware limited liability company	Delaware – January 20, 2011
8. Inland Western Stockton Airport Way II, L.L.C., a Delaware limited liability company	Delaware – January 7, 2011 California – January 7, 2011
9. Inland Western Hartford New Park, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Connecticut – January 5, 2011
10. Inland Western Cave Creek Tatum Boulevard, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Arizona – January 6, 2011
11. Inland Western Green Global Gateway, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Ohio – January 5, 2011
12. Inland Western Greenville Five Forks Outlot, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 South Carolina – January 14, 2011
13. Inland Western Greenville Five Forks, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 South Carolina – January 14, 2011
14. Inland Western Oswego Gerry Centennial, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Illinois – January 5, 2011
15. Inland Western Altamonte Springs State Road, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Florida – January 5, 2011
16. Inland Western Phillipsburg Greenwich, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 New Jersey – January 5, 2011
17. Inland Western Maple Grove Wedgwood, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Minnesota – January 5, 2011
18. Inland Western Concord Northlite, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 North Carolina – January 5, 2011
19. Inland Western Georgetown Magnolia, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Kentucky – January 5, 2011
20. Inland Western Town and Country Manchester, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Missouri – January 5, 2011
21. Inland Western Thousand Oaks, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 California – January 5, 2011
22. Inland Western Gilroy I, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 California – January 6, 2011
23. Inland Western Fort Myers Page Field, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Florida – January 5, 2011
24. Inland Western Ottawa Dayton, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Illinois – January 5, 2011
25. Inland Western Kalamazoo WMU, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Michigan – January 5, 2011
26. Inland Western Cambridge Brick Church, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Ohio – January 5, 2011
27. Inland Western Westerville Cleveland, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Ohio – January 5, 2011
28. Inland Western Kansas City Stateline, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Missouri – January 5, 2011
29. Inland Western Temecula Commons, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 California – January 6, 2011
30. Stroud Commons, LLC, a Delaware limited liability company	Delaware – January 5, 2011 Pennsylvania – January 6, 2011
31. Inland Western Blytheville, L.L.C., a Delaware limited liability company	Delaware – January 5, 2011 Arkansas – January 5, 2011
32. Inland Western San Antonio Fountainhead Drive Limited Partnership, an Illinois limited partnership	Illinois – January 25, 2011 Texas – January 24, 2011
33. Inland Western Grand Prairie Carrier Limited Partnership, an Illinois limited partnership	Illinois – January 5, 2011 Texas – January 5, 2011
34. Inland Western Austin Southpark Meadows II Limited Partnership, an Illinois limited partnership	Illinois – January 5, 2011 Texas – January 6, 2011
35. Inland Western Fort Worth Southwest Crossing Limited Partnership, an Illinois limited partnership	Illinois – January 5, 2011 Texas – January 6, 2011
36. Inland Western State College Science Park DST, a Delaware statutory trust	Delaware – January 5, 2011 Pennsylvania – January 6, 2011

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EXHIBIT G

BORROWING NOTICE

Date:

KeyBank National Association

Real Estate Capital

127 Public Square

Cleveland, Ohio   44114

Attention:  John Hyland

Borrowing Notice

Inland Western Retail Real Estate Trust, Inc. hereby requests a Loan Advance pursuant to Section 2.9 of the Amended and Restated Credit Agreement dated as of February 4, 2011 (as amended or modified from time to time, the “Credit Agreement”), among Inland Western Retail Real Estate Trust, Inc., the Lenders referenced therein, and you, as Agent for the Lenders.

An Advance is requested to be made in the amount of $__________, to be made on _____________.  Such Loan shall be a [LIBOR] [Floating] [Swingline] Rate Advance.  [The applicable LIBOR Interest Period shall be _____________.]

The proceeds of this Advance will be used either: (check one)

(i)

to refinance the Original Credit Agreement

(ii)

for working capital purposes,

(iii)

for bridge debt financing purposes,

(iv)

for the development or redevelopment of the following Project, including tenant

  improvements, capital expenditures or leasing commissions related thereto, or

(v)

for the acquisition of the following Project:

Name of Project:

Address of Project:

Description of Project:

For further information see Schedule I and the one page Project summary attached to this Borrowing Notice.

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The proceeds of the requested Advance shall be directed to the following account:

Wiring Instructions:

(Bank Name)

(ABA No.)

(Beneficiary)

(Account No. to Credit)

(Notification Requirement)

In support of this request, Inland Western Retail Real Estate Trust, Inc. hereby represents and warrants to the Agent and the Lenders that all requirements of Section 4.2 of the Credit Agreement in connection with such Advance have been satisfied at the time such proceeds are disbursed.

Date:_________________________________

For Borrower:  Inland Western Retail Real Estate Trust, Inc.

By:  

_________________________________

Name:

_________________________________

Its:

_________________________________

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Inland Western Retail Real Estate Trust, Inc.

Acquisition Property / Schedule 1 to Borrowing Notice

Acquisition
Date Property
Name Location Property
Type Acquisition
Cos % Owned 100% of Acquisition
Cost Secured Indebtedness, If Any Ground Lease? Stabilized? Occupancy 12-month NOI

EXHIBIT H

AMENDED AND RESTATED SUBSIDIARY GUARANTY

This Amended and Restated Subsidiary Guaranty is made as of February 4, 2011 by the parties identified in the signature pages thereto, and any Joinder to Guaranty hereafter delivered (collectively, the “Subsidiary Guarantors”), to and for the benefit of KeyBank National Association, individually (“KeyBank”) and as administrative agent (“Administrative Agent”) for itself and the lenders under the Credit Agreement (as defined below) and their respective successors and assigns (collectively, the “Lenders”).

RECITALS

A.

Inland Western Retail Real Estate Trust, Inc., a corporation organized under the laws of the State of Maryland (“Borrower”), and Subsidiary Guarantors have requested that the Lenders make a combined term loan and revolving credit facility available to Borrower in an aggregate principal amount of $585,000,000, subject to possible future increase to an aggregate of $650,000,000 (the “Facility”).

B.

The Lenders have agreed to make available the Facility to Borrower pursuant to the terms and conditions set forth in an Amended and Restated Credit Agreement dated of even date herewith among Borrower, KeyBank, individually, and as Administrative Agent, and the Lenders named therein (as amended, modified or restated from time to time, the “Credit Agreement”).  All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement.

C.

Borrower has executed and delivered or will execute and deliver to the Lenders promissory notes in the principal amount of each Lender’s Commitment and promissory notes in the principal amount, if any, of each Lender’s Loan as evidence of Borrower’s indebtedness to each such Lender with respect to the Facility (the promissory notes described above, together with any amendments or allonges thereto, or restatements, replacements or renewals thereof, and/or new promissory notes to new Lenders under the Credit Agreement, are collectively referred to herein as the “Notes”).

D.

Subsidiary Guarantors are subsidiaries of Borrower.  Subsidiary Guarantors acknowledge that the extension of credit by the Administrative Agent and the Lenders to Borrower pursuant to the Credit Agreement will benefit Subsidiary Guarantors by making funds available to Subsidiary Guarantors through Borrower and by enhancing the financial strength of the consolidated group of which Subsidiary Guarantors and Borrower are members.  The execution and delivery of this Guaranty by Subsidiary Guarantors are conditions precedent to the performance by the Lenders of their obligations under the Credit Agreement.

E.

This Guaranty amends and restates in its entirety that certain Subsidiary Guaranty dated as of April 17, 2009 made by certain of the Guarantors for the benefit of the Administrative Agent on behalf of the Lenders party to the Original Credit Agreement. This Guaranty constitutes an amendment and restatement of such prior Subsidiary Guaranty and not a novation, and the parties intend that all amounts guarantied thereunder shall continue to be

G-1

guarantied hereunder until repaid, and that the obligations of those Subsidiary Guarantors who were parties to such prior Subsidiary Guaranty with respect to the Borrower’s obligations under the Original Credit Agreement and are continuing as Subsidiary Guarantors hereunder shall continue in effect and relate back to the date such obligations were first undertaken, as such obligations may be expressly amended and restated hereunder.

AGREEMENTS

NOW, THEREFORE, Subsidiary Guarantors, in consideration of the matters described in the foregoing Recitals, which Recitals are incorporated herein and made a part hereof, and for other good and valuable consideration, hereby agree as follows:

1.

Subsidiary Guarantors absolutely, unconditionally, and irrevocably guaranty to each of the Lenders:

(a)

the full and prompt payment of the principal of and interest on the Notes when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, and the prompt payment of all sums which may now be or may hereafter become due and owing under the Notes, the Credit Agreement, and the other Loan Documents;

(b)

the payment of all Enforcement Costs (as hereinafter defined in Paragraph 7 hereof); and

(c)

the full, complete, and punctual observance, performance, and satisfaction of all of the obligations, duties, covenants, and agreements of Borrower under the Credit Agreement and the Loan Documents.

All amounts due, debts, liabilities, and payment obligations described in subparagraphs (a) and (b) of this Paragraph 1 are referred to herein as the “Facility Indebtedness.”  All obligations described in subparagraph (c) of this Paragraph 1 are referred to herein as the “Obligations.”  Subsidiary Guarantors and Lenders agree that Subsidiary Guarantors’ obligations hereunder shall not exceed the greater of:  (i) the aggregate amount of all monies received, directly or indirectly, by Subsidiary Guarantors from Borrower after the date hereof (whether by loan, capital infusion or other means), or (ii) the maximum amount of the Facility Indebtedness not subject to avoidance under Title 11 of the United States Code, as same may be amended from time to time, or any applicable state law (the “Bankruptcy Code”).  To that end, to the extent such obligati ons would otherwise be subject to avoidance under the Bankruptcy Code if Subsidiary Guarantors are not deemed to have received valuable consideration, fair value or reasonably equivalent value for its obligations hereunder, each Subsidiary Guarantor’s obligations hereunder shall be reduced to that amount which, after giving effect thereto, would not render such Subsidiary Guarantor insolvent, or leave such Subsidiary Guarantor with an unreasonably small capital to conduct its business, or cause such Subsidiary Guarantor to have incurred debts (or intended to have incurred debts) beyond its ability to pay such debts as they mature, as such terms are determined, and at the time such obligations are deemed to have been incurred, under the Bankruptcy Code.  In the event a Subsidiary Guarantor shall make any

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payment or payments under this Guaranty each other Subsidiary Guarantor of the Facility Indebtedness shall contribute to such Subsidiary Guarantor an amount equal to such non-paying Subsidiary Guarantor’s pro rata share (based on their respective maximum liabilities hereunder) of such payment or payments made by such Subsidiary Guarantor, provided that such contribution right shall be subordinate and junior in right of payment in full of all the Facility Indebtedness to Lenders. Subsidiary Guarantors and Lenders further agree that Subsidiary Guarantors’ obligations hereunder with regard to the Facility Obligations shall be determined in accordance with the terms hereof and Subsidiary Guarantors’ obligations hereunder are not intended to be determined by or subject to the definition of “Guarantee Obligations” in the Credit Agreement.

2.

In the event of any default by Borrower in making payment of the Facility Indebtedness, or in performance of the Obligations, as aforesaid, in each case beyond the expiration of any applicable grace period, Subsidiary Guarantors agree, on demand by the Administrative Agent or the holder of a Note, to pay all the Facility Indebtedness and to perform all the Obligations as are then or thereafter become due and owing or are to be performed under the terms of the Notes, the Credit Agreement, and the other Loan Documents.

3.

Subsidiary Guarantors do hereby waive (i) notice of acceptance of this Guaranty by the Administrative Agent and the Lenders and any and all notices and demands of every kind which may be required to be given by any statute, rule or law, (ii) any defense, right of set-off or other claim which Subsidiary Guarantors may have against Borrower or which Subsidiary Guarantors or Borrower may have against the Administrative Agent or the Lenders or the holder of a Note, (iii) presentment for payment, demand for payment (other than as provided for in Paragraph 2 above), notice of nonpayment (other than as provided for in Paragraph 2 above) or dishonor, protest and notice of protest, diligence in collection and any and all formalities which otherwise might be legally required to charge Subsidiary Guarantors with liability, (iv) any failure by the Administrative Agent and the Lenders to inform Subsidiary Guarantors of any fac ts the Administrative Agent and the Lenders may now or hereafter know about Borrower, the Facility, or the transactions contemplated by the Credit Agreement, it being understood and agreed that the Administrative Agent and the Lenders have no duty so to inform and that Subsidiary Guarantors are fully responsible for being and remaining informed by Borrower of all circumstances bearing on the existence or creation, or the risk of nonpayment of the Facility Indebtedness or the risk of nonperformance of the Obligations, (v) any and all right to cause a marshalling of assets of Borrower or any other action by any court or governmental body with respect thereto, or to cause the Administrative Agent and the Lenders to proceed against any other security given to a Lender in connection with the Facility Indebtedness or the Obligations, (vi) any invalidity or unenforceability of the Facility Indebtedness, (vii) any amendment or waiver of the Facility Indebtedness, including without limitation any of the actions descr ibed in Paragraph 4 below, and (viii) any failure to perfect any security interest in the Collateral securing the Facility Indebtedness or any release of such Collateral, including without limitation any of the actions with respect to the Collateral described in Paragraph 4 below.  Credit may be granted or continued from time to time by the Lenders to Borrower without notice to or authorization from Subsidiary Guarantors, regardless of the financial or other condition of Borrower at the time of any such grant or continuation.  The Administrative Agent and the Lenders shall have no

H-3

obligation to disclose or discuss with Subsidiary Guarantors the Lenders’ assessment of the financial condition of Borrower.  Subsidiary Guarantors acknowledge that no representations of any kind whatsoever have been made by the Administrative Agent and the Lenders to Subsidiary Guarantors.  No modification or waiver of any of the provisions of this Guaranty shall be binding upon the Administrative Agent and the Lenders except as expressly set forth in a writing duly signed and delivered on behalf of the Administrative Agent and the Lenders.  Subsidiary Guarantors further agree that any exculpatory language contained in the Credit Agreement, the Notes, and the other Loan Documents shall in no event apply to this Guaranty, and will not prevent the Administrative Agent and the Lenders from proceeding against Subsidiary Guarantors to enforce this Guaranty.

4.

Subsidiary Guarantors further agree that Subsidiary Guarantors’ liability as guarantor shall in no way be impaired by any renewals or extensions which may be made from time to time, with or without the knowledge or consent of Subsidiary Guarantors of the time for payment of interest or principal under a Note or by any forbearance or delay in collecting interest or principal under a Note, or by any waiver by the Administrative Agent and the Lenders under the Credit Agreement, or any other Loan Documents, or by the Administrative Agent or the Lenders’ failure or election not to pursue any other remedies they may have against Borrower, or by any change or modification in a Note, the Credit Agreement, or any other Loan Documents, or by the acceptance by the Administrative Agent or the Lenders of any security or any increase, substitution or change therein, or by the release by the Administrative Agent and the Lenders of a ny security or any withdrawal thereof or decrease therein, or by the application of payments received from any source to the payment of any obligation other than the Facility Indebtedness, even though a Lender might lawfully have elected to apply such payments to any part or all of the Facility Indebtedness, it being the intent hereof that Subsidiary Guarantors shall remain liable as principal for payment of the Facility Indebtedness and performance of the Obligations until all indebtedness has been paid in full and the other terms, covenants and conditions of the Credit Agreement, and other Loan Documents and this Guaranty have been performed, notwithstanding any act or thing which might otherwise operate as a legal or equitable discharge of a surety.  Subsidiary Guarantors further understand and agree that the Administrative Agent and the Lenders may at any time enter into agreements with Borrower to amend and modify a Note, the Credit Agreement or any of the other Loan Documents, or any other documen ts related thereto, and may waive or release any provision or provisions of a Note, the Credit Agreement, or any other Loan Document and, with reference to such instruments, may make and enter into any such agreement or agreements as the Administrative Agent, the Lenders and Borrower may deem proper and desirable, without in any manner impairing this Guaranty or any of the Administrative Agent and the Lenders’ rights hereunder or any of Subsidiary Guarantors’ obligations hereunder. Each of the Subsidiary Guarantors agrees not to assert any claim any claim against the Administrative Agent or any Lender, any of their respective Affiliates, or any of their or their respective Affiliates, officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to any facility hereunder, the actual or proposed use of the Loans or any Letter of Credit, the Loan Documents or the transactions contemplated thereby.

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5.

This is an absolute, unconditional, complete, present and continuing guaranty of payment and performance and not of collection.  Subsidiary Guarantors agree that its obligations hereunder shall be joint and several with any and all other guarantees given in connection with the Facility from time to time.  Subsidiary Guarantors agree that this Guaranty may be enforced by the Administrative Agent and the Lenders without the necessity at any time of resorting to or exhausting any security or collateral, if any, given in connection herewith or with a Note, the Credit Agreement, or any of the other Loan Documents or by or resorting to any other guaranties, and Subsidiary Guarantors hereby waive the right to require the Administrative Agent and the Lenders to join Borrower in any action brought hereunder or to commence any action against or obtain any judgment against Borrower or to pursue any other remedy or enforce any ot her right.  Subsidiary Guarantors further agree that nothing contained herein or otherwise shall prevent the Administrative Agent and the Lenders from pursuing concurrently or successively all rights and remedies available to them at law and/or in equity or under a Note, the Credit Agreement or any other Loan Documents, and the exercise of any of their rights or the completion of any of their remedies shall not constitute a discharge of any of Subsidiary Guarantors’ obligations hereunder, it being the purpose and intent of Subsidiary Guarantors that the obligations of such Subsidiary Guarantors hereunder shall be primary, absolute, independent and unconditional under any and all circumstances whatsoever.  Neither Subsidiary Guarantors’ obligations under this Guaranty nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by any impairment, modification, change, release or limitation of the liability of Borrower under a Note, th e Credit Agreement or any other Loan Document or by reason of Borrower’s bankruptcy or by reason of any creditor or bankruptcy proceeding instituted by or against Borrower.  This Guaranty shall continue to be effective and be deemed to have continued in existence or be reinstated (as the case may be) if at any time payment of all or any part of any sum payable pursuant to a Note, the Credit Agreement or any other Loan Document is rescinded or otherwise required to be returned by the payee upon the insolvency, bankruptcy, or reorganization of the payor, all as though such payment to such Lender had not been made, regardless of whether such Lender contested the order requiring the return of such payment.  The obligations of Subsidiary Guarantors pursuant to the preceding sentence shall survive any termination, cancellation, or release of this Guaranty.

6.

This Guaranty shall be assignable by a Lender to any assignee of all or a portion of such Lender’s rights under the Loan Documents.

7.

If:  (i) this Guaranty, a Note, or any of the Loan Documents are placed in the hands of an attorney for collection or is collected through any legal proceeding; (ii) an attorney is retained to represent the Administrative Agent or any Lender in any bankruptcy, reorganization, receivership, or other proceedings affecting creditors’ rights and involving a claim under this Guaranty, a Note, the Credit Agreement, or any Loan Document; (iii) an attorney is retained to enforce any of the other Loan Documents or to provide advice or other representation with respect to the Loan Documents in connection with an enforcement action or potential enforcement action; or (iv) an attorney is retained to represent the Administrative Agent or any Lender in any other legal proceedings whatsoever in connection with this Guaranty, a Note, the Credit Agreement, any of the Loan Documents, or any property subject thereto (other than any

H-5

action or proceeding brought by any Lender or participant against the Administrative Agent alleging a breach by the Administrative Agent of its duties under the Loan Documents), then Subsidiary Guarantors shall pay to the Administrative Agent or such Lender upon demand all reasonable attorney’s fees, costs and expenses, including, without limitation, court costs, filing fees and all other costs and expenses incurred in connection therewith (all of which are referred to herein as “Enforcement Costs”), in addition to all other amounts due hereunder.

8.

The parties hereto intend that each provision in this Guaranty comports with all applicable local, state and federal laws and judicial decisions.  However, if any provision or provisions, or if any portion of any provision or provisions, in this Guaranty is found by a court of law to be in violation of any applicable local, state or federal ordinance, statute, law, administrative or judicial decision, or public policy, and if such court should declare such portion, provision or provisions of this Guaranty to be illegal, invalid, unlawful, void or unenforceable as written, then it is the intent of all parties hereto that such portion, provision or provisions shall be given force to the fullest possible extent that they are legal, valid and enforceable, that the remainder of this Guaranty shall be construed as if such illegal, invalid, unlawful, void or unenforceable portion, provision or provisions were not contained therei n, and that the rights, obligations and interest of the Administrative Agent and the Lender or the holder of a Note under the remainder of this Guaranty shall continue in full force and effect.

9.

Any indebtedness of Borrower to Subsidiary Guarantors now or hereafter existing is hereby subordinated to the Facility Indebtedness.  Subsidiary Guarantors will not seek, accept, or retain for Subsidiary Guarantors’ own account, any payment from Borrower on account of such subordinated debt at any time when a Default or Event of Default exists under the Credit Agreement or the Loan Documents, and any such payments to Subsidiary Guarantors made while any Default or Event of Default then exists under the Credit Agreement or the Loan Documents on account of such subordinated debt shall be collected and received by Subsidiary Guarantors in trust for the Lenders and shall be paid over to the Administrative Agent on behalf of the Lenders on account of the Facility Indebtedness without impairing or releasing the obligations of Subsidiary Guarantors hereunder.

10.

Subsidiary Guarantors hereby subordinate to the Facility Indebtedness any and all claims and rights, including, without limitation, subrogation rights, contribution rights, reimbursement rights and set-off rights, which Subsidiary Guarantors may have against Borrower arising from a payment made by Subsidiary Guarantors under this Guaranty and agree that, until the entire Facility Indebtedness is paid in full, not to assert or take advantage of any subrogation rights of Subsidiary Guarantors or the Lenders or any right of Subsidiary Guarantors or the Lenders to proceed against (i) Borrower for reimbursement, or (ii) any other guarantor or any collateral security or guaranty or right of offset held by the Lenders for the payment of the Facility Indebtedness and performance of the Obligations, nor shall Subsidiary Guarantors seek or be entitled to seek any contribution or reimbursement from Borrower or any other guarantor in respe ct of payments made by Subsidiary Guarantors hereunder.  It is expressly understood that the agreements of Subsidiary Guarantors set forth above constitute additional and cumulative benefits given to the Lenders for their security and as an inducement for their extension of credit to Borrower.

H-6

11.

Any amounts received by a Lender from any source on account of any indebtedness may be applied by such Lender toward the payment of such indebtedness, and in such order of application, as a Lender may from time to time elect.

12.

Subsidiary Guarantors hereby submit to personal jurisdiction in the State of Illinois for the enforcement of this Guaranty and waive any and all personal rights to object to such jurisdiction for the purposes of litigation to enforce this Guaranty.  Subsidiary Guarantors hereby consent to the jurisdiction of either the Circuit Court of Cook County, Illinois, or the United States District Court for the Northern District of Illinois, in any action, suit, or proceeding which the Administrative Agent or a Lender may at any time wish to file in connection with this Guaranty or any related matter.  Subsidiary Guarantors hereby agree that an action, suit, or proceeding to enforce this Guaranty may be brought in any state or federal court in the State of Illinois and hereby waives any objection which Subsidiary Guarantors may have to the laying of the venue of any such action, suit, or proceeding in any such court; provided, however, that the provisions of this Paragraph shall not be deemed to preclude the Administrative Agent or a Lender from filing any such action, suit, or proceeding in any other appropriate forum.

13.

All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by telex or by facsimile and addressed or delivered to such party at its address set forth below or at such other address as may be designated by such party in a notice to the other parties.  Any notice, if mailed and properly addressed with postage prepaid, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted.  Notice may be given as follows:

To Subsidiary Guarantors:

c/o Inland Western Retail Real Estate Trust, Inc.

2901 Butterfield Road

Oak Brook, Illinois  60523

Attention:  Steven P. Grimes

Telephone:  630-218-8000

Facsimile:  630-368-2308

With a copy to:

Inland Western Retail Real Estate Trust, Inc.

2901 Butterfield Road

Oak Brook, Illinois  60523

Attention:  Dennis Holland

Telephone:  630-368-2861

Facsimile:  630-586-6446

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To KeyBank as Administrative Agent and as a Lender:

KeyBank National Association

KeyBank Real Estate Capital

1200 Abernathy Road NE, Suite 1550

Atlanta, Georgia  30328

Attention:  Kevin P. Murray

Phone:  770-510-2168

Facsimile:  770-510-2195

With a copy to:

SNR Denton LLP

233 South Wacker Drive, Suite 7800

Chicago, Illinois  60606

Attention:  Patrick G. Moran, Esq.

Telephone:  312-876-8132

Facsimile:  312-876-7934

If to any other Lender, to its address set forth in the Credit Agreement.

14.

This Guaranty shall be binding upon the heirs, executors, legal and personal representatives, successors and assigns of Subsidiary Guarantors and shall inure to the benefit of the Administrative Agent and the Lenders’ successors and assigns.

15.

This Guaranty shall be construed and enforced under the internal laws of the State of Illinois.

16.

SUBSIDIARY GUARANTORS, THE ADMINISTRATIVE AGENT AND THE LENDERS, BY THEIR ACCEPTANCE HEREOF, EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHT UNDER THIS GUARANTY OR ANY OTHER LOAN DOCUMENT OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP WHICH IS THE SUBJECT OF THIS GUARANTY AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

17.

Neither the execution and delivery by the Subsidiary Guarantors of this Guaranty, nor the consummation of the transactions contemplated by the Credit Agreement, nor compliance with the provisions thereof will violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on any of the Subsidiary Guarantors or their respective articles of organization, articles of formation, certificates of trust, limited partnership certificates, operating agreements, trust agreements, or limited partnership agreements, or the provisions of any indenture, instrument or agreement to which any of the Subsidiary Guarantors is a party or is subject, or by which it, or its Property, is bound, or conflict with or constitute a default thereunder, except where such violation, conflict or default would not have a Material Adverse Effect, or result in the creation or imposition of any Lien (other the Liens created

H-8

pursuant to the Credit Agreement) in, of or on the Property of such Subsidiary Guarantor pursuant to the terms of any such indenture, instrument or agreement.  No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with the execution, delivery and performance of, or the legality, validity, binding effect or enforceability of, this Guaranty.

18.

From time to time, additional parties may execute a joinder substantially in the form of Exhibit A hereto, and thereby become a party to this Guaranty.  From and after delivery of such joinder, the Subsidiary delivering such joinder shall be a Subsidiary Guarantor, and be bound by all of the terms and provisions of this Guaranty.  From time to time certain Subsidiary Guarantors shall automatically be released from their obligations under this Guaranty upon satisfaction of the conditions to such release established pursuant to Section 6.27 of the Credit Agreement.

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IN WITNESS WHEREOF, Subsidiary Guarantors have delivered this Guaranty in the State of Illinois as of the date first written above.

INLAND WESTERN ATLANTA CASCADE AVENUE, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2479009

INLAND WESTERN IOWA CITY ALEXANDER, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

Member

By:

Name:

Title:

FEIN:  20-2094333

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INLAND WESTERN MESA FIESTA, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

Member

By:

Name:

Title:

FEIN:  20-2058031

INLAND WESTERN NEW BRITAIN MAIN, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

Member

By:

Name:

Title:

FEIN:  20-0516778

H-11

INLAND WESTERN PHOENIX 19TH AVENUE, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

Member

By:

Name:

Title:

FEIN:  20-1907942

INLAND WESTERN RC-I GP, LLC, a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  27-3127247

INLAND WESTERN RC-I LP, LLC, a Delaware limited liability company

By:

Inland Western Retail Real Estate

Trust, Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  27-3127325

H-12

INLAND WESTERN SAN ANTONIO FOUNTAINHEAD DRIVE LIMITED PARTNERSHIP, an Illinois limited partnership

By:

Inland Western San Antonio Fountainhead

Drive GP, L.L.C., a Delaware limited liability

company, its general partner

By:

Inland Western Retail Real Estate

Trust, Inc., a Maryland corporation,

its sole member

By:

Name:

Title:

FEIN:  20-2496988

INLAND WESTERN GRAND PRAIRIE CARRIER LIMITED PARTNERSHIP, an Illinois limited partnership

By:

Inland Western Grand Prairie Carrier GP,

L.L.C., a Delaware limited liability company,

its general partner

By:

Inland Western Retail Real Estate

Trust, Inc., a Maryland corporation,

its sole member

By:

Name:

Title:

FEIN:  20-3964607

H-13

INLAND WESTERN STOCKTON AIRPORT WAY II, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  26-0504973

INLAND WESTERN HARTFORD NEW PARK, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2785007

H-14

INLAND WESTERN CAVE CREEK TATUM BOULEVARD, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-3985184

INLAND WESTERN GREEN GLOBAL GATEWAY, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-3266085

INLAND WESTERN GREENVILLE FIVE FORKS OUTLOT, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN: 20-2409857

H-15

INLAND WESTERN GREENVILLE FIVE FORKS, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-1879070

INLAND WESTERN OSWEGO GERRY CENTENNIAL, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  26-2934910

INLAND WESTERN ALTAMONTE SPRINGS STATE ROAD, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-3532521

H-16

INLAND WESTERN PHILLIPSBURG GREENWICH, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2729764

INLAND WESTERN MAPLE GROVE WEDGWOOD, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-1317375

INLAND WESTERN CONCORD NORTHLITE, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-1609557

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INLAND WESTERN GEORGETOWN MAGNOLIA, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-3470630

INLAND WESTERN TOWN AND COUNTRY MANCHESTER, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-1431000

INLAND WESTERN THOUSAND OAKS, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-0512815

H-18

INLAND WESTERN GILROY I, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-3256133

INLAND WESTERN FORT MYERS PAGE FIELD, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2642617

H-19

INLAND WESTERN OTTAWA DAYTON, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2986004

INLAND WESTERN STATE COLLEGE SCIENCE PARK DST, a Delaware statutory trust

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its depositor

and signatory trustee

By:

Name:

Title:

FEIN:  20-3570507

INLAND WESTERN KALAMAZOO WMU, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2885935

H-20

INLAND WESTERN CAMBRIDGE BRICK CHURCH, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-3714218

TOWN SQUARE VENTURES V, L.P., a Texas limited partnership

By:

Town Square Ventures V GP, L.L.C., a

Delaware limited liability company, its

general partner

By:

Inland Western Retail Real Estate

Trust, Inc., a Maryland corporation,

its sole member

By:

Name:

Title:

FEIN:  26-3303640

H-21

INLAND WESTERN AUSTIN SOUTHPARK MEADOWS II LIMITED PARTNERSHIP, an Illinois limited partnership

By:

Inland Western Austin Southpark Meadows

II GP, L.L.C., a Delaware limited liability

company

By:

Inland Western Retail Real Estate

Trust, Inc., a Maryland corporation,

its sole member

By:

Name:

Title:

FEIN:  20-8574543

INLAND WESTERN FORT WORTH SOUTHWEST CROSSING LIMITED PARTNERSHIP, an Illinois limited partnership

By:

Inland Western Fort Worth Southwest

Crossing GP, L.L.C., a Delaware limited

liability company

By:

Inland Western Retail Real Estate

Trust, Inc., a Maryland corporation,

its sole member

By:

Name:

Title:

FEIN:  20-2989169

H-22

INLAND WESTERN WESTERVILLE CLEVELAND, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2216129

INLAND WESTERN KANSAS CITY STATELINE, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2409962

INLAND WESTERN TEMECULA COMMONS, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-2642339

H-23

STROUD COMMONS, LLC, a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  26-0101120

INLAND WESTERN BLYTHEVILLE, L.L.C., a Delaware limited liability company

By:

Inland Western Retail Real Estate Trust,

Inc., a Maryland corporation, its sole

member

By:

Name:

Title:

FEIN:  20-1198854

H-24

EXHIBIT A TO SUBSIDIARY GUARANTY

FORM OF JOINDER TO GUARANTY

THIS JOINDER is executed as of ___________, 20__ by the undersigned, each of which hereby agrees as follows:

1.

All capitalized terms used herein and not defined in this Joinder shall have the meanings provided in that certain Amended and Restated Subsidiary Guaranty (the “Guaranty”) dated as of February 4, 2011 executed for the benefit of KeyBank National Association, as agent for itself and certain other lenders, with respect to a loan from the Lenders to Inland Western Retail Real Estate Trust, Inc. (“Borrower”).

2.

As required by the Credit Agreement described in the Guaranty, each of the undersigned is executing this Joinder to become a party to the Guaranty.

3.

Each and every term, condition, representation, warranty, and other provision of the Guaranty, by this reference, is incorporated herein as if set forth herein in full and the undersigned agrees to fully and timely perform each and every obligation of a Subsidiary Guarantor under such Guaranty.

[INSERT SUBSIDIARY GUARANTOR SIGNATURE BLOCKS AND FEIN NUMBER]

FEIN NO. ______________________

By:

By:

Its:

H-25

EXHIBIT I

FORM OF MORTGAGE

I-1

MORTGAGE

MADE BY

INLAND WESTERN [     ], L.L.C.,
a [Delaware limited liability company],

as Mortgagor

to

KEYBANK NATIONAL ASSOCIATION,
as Administrative Agent for itself
and one or more Lenders,

as Mortgagee

Dated as of:  [   , 2011]

[If applicable, add legend limiting maximum principal
liability of Mortgagor as needed to address state mortgage tax.]

I-1

MORTGAGE,
ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND

FIXTURE FILING

Project Commonly Known As
[“     ”]

THIS MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this “Mortgage”) is made as of [_____________ __, 2011], by INLAND WESTERN [________________________], L.L.C., a Delaware limited liability company (“Mortgagor”) whose address is c/o Inland Western Retail Real Estate Trust, Inc., 2901 Butterfield Road, Oak Brook, Illinois 60523, for the benefit of KEYBANK NATIONAL ASSOCIATION, as administrative agent (together with its successors and assigns in such capacity, the “Mortgagee”) for itself and one or more Lenders (as defined in the Credit Agreement described below), whose address is 127 Public Square, Cleveland, Ohio 44114.

1.

Grant and Secured Obligations.

1.1

Grant.  Inland Western Retail Real Estate Trust, Inc., a corporation organized under the laws of the State of Maryland (the “Borrower”), KeyBank National Association, individually and as administrative agent, and certain other lenders are parties to that certain Amended and Restated Credit Agreement dated as of February __, 2011 (the “Credit Agreement”).  All capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Credit Agreement.  Borrower has executed and delivered to the Lenders certain promissory notes and may in the future execute and deliver to the Lenders additional promissory notes (the promissory notes, made in favor of the Lenders, together with any amendments or allonges thereto, or restatements, replacements or renewals thereof, or new promissory notes to new Lenders under the Credit Agreement, are collectively referred to herein as the “Notes”), in and by which the Borrower promises to pay the principal of all Loans under such Credit Agreement and interest at the rate and in installments as provided in the Credit Agreement, with a final payment of the outstanding principal balance and accrued and unpaid interest being due on or before an initial maturity date of February ___, 2013, subject to extension to a final maturity date of February ___, 2014 in accordance with the terms of the Credit Agreement.  Mortgagor has guaranteed payment and performance of Borrower’s obligations under the Notes and the Credit Agreement pursuant to an Amended and Restated Subsidiary Guaranty (the “Guaranty”) dated as of February __, 2011.  The maximum aggregate principal amount of the Loans evidenced by the Notes shall be $585,000,000, subject to increase up to $650,000,000.  The indebtedness secured hereby shall be governed by the terms and conditions of the Credit Agreement.

In consideration of the debt evidenced by the Notes and the Commitments evidenced by the Credit Agreement and to secure the timely payment of both principal and interest in accordance with the terms and provisions of the Notes and the Guaranty and in accordance with the terms, provisions and limitations of this Mortgage, to secure the payment of any and all amounts advanced by the Mortgagee with respect to the Premises for the payment of taxes, assessments, insurance premiums or any other costs incurred in the protection of the Premises,

I-1

and to secure the performance of the covenants and agreements contained herein and in the Notes, the Credit Agreement, the Guaranty, the Security Documents and any other documents evidencing or securing the loans secured hereby or delivered to Mortgagee pursuant to the Credit Agreement (collectively, the “Loan Documents”) to be performed by Borrower or any Guarantor, and for the purpose of securing payment and performance of the Secured Obligations defined and described in Section 1.2 below, Mortgagor hereby irrevocably and unconditionally grants, bargains, sells, conveys, mortgages and warrants to Mortgagee, with power of sale and with right of entry and possession, all estate, right, title and interest which Mortgagor now has or may later acquire in and to the following property (all or any part of such property, or any interest in all or any part of it, as the context may require, the “Property”):

(a)

The real property described in Exhibit A, together with all existing and future easements and rights affording access to it (the “Premises”); together with

(b)

All buildings, structures and improvements now located or later to be constructed on the Premises (the “Improvements”); together with

(c)

All existing and future appurtenances, privileges, easements, franchises and tenements of the Premises, including all minerals, oil, gas, other hydrocarbons and associated substances, sulphur, nitrogen, carbon dioxide, helium and other commercially valuable substances which may be in, under or produced from any part of the Premises, all development rights and credits, air rights, water, water rights (whether riparian, appropriative or otherwise, and whether or not appurtenant) and water stock, and any Premises lying in the streets, roads or avenues, open or proposed, in front of or adjoining the Premises and Improvements; together with

(d)

All existing and future leases, subleases, subtenancies, licenses, occupancy agreements and concessions (“Leases”) relating to the use and enjoyment of all or any part of the Premises and Improvements, and any and all guaranties and other agreements relating to or made in connection with any of such Leases; together with

(e)

All real property and improvements on it, and all appurtenances and other property and interests of any kind or character, whether described in Exhibit A or not, which may be reasonably necessary or desirable to promote the present and any reasonable future beneficial use and enjoyment of the Premises and Improvements; together with

(f)

All goods, materials, supplies, chattels, furniture, fixtures, equipment and machinery now or later to be attached to, placed in or on, or used in connection with the use, enjoyment, occupancy or operation of all or any part of the Premises and Improvements, whether stored on the Premises or elsewhere, including all pumping plants, engines, pipes, ditches and flumes, and also all gas, electric, cooking, heating, cooling, air conditioning, lighting, refrigeration and plumbing fixtures and equipment, all of which shall be considered to the fullest extent of the law to be real property for purposes of this Mortgage and any manufacturer’s warranties with respect thereto; together with

I-2

(g)

All building materials, equipment, work in process or other personal property of any kind, whether stored on the Premises or elsewhere, which have been or later will be acquired for the purpose of being delivered to, incorporated into or installed in or about the Premises or Improvements; together with

(h)

All of Mortgagor’s interest in and to all operating accounts pertaining to the Property; together with

(i)

All rights to the payment of money, accounts, accounts receivable, reserves, deferred payments, refunds (including real estate tax refunds), cost savings, payments and deposits, whether now or later to be received from third parties (including all earnest money sales deposits) or deposited by Mortgagor with third parties (including all utility deposits), contract rights (including any property management agreements), development and use rights, governmental permits and licenses, applications, architectural and engineering plans, specifications and drawings, as-built drawings, chattel paper, instruments, documents, notes, drafts and letters of credit (other than letters of credit in favor of Mortgagee), which arise from or relate to construction on the Premises or to any business now or later to be conducted on it, or to the Premises and Improvements generally and any builder’s or manufacturer’s warr anties with respect thereto; together with

(j)

All insurance policies pertaining to the Premises and all proceeds, including all claims to and demands for them, of the voluntary or involuntary conversion of any of the Premises, Improvements or the other property described above into cash or liquidated claims, including proceeds of all present and future fire, hazard or casualty insurance policies and all condemnation awards or payments now or later to be made by any public body or decree by any court of competent jurisdiction for any taking or in connection with any condemnation or eminent domain proceeding, and all causes of action and their proceeds for any damage or injury to the Premises, Improvements or the other property described above or any part of them, or breach of warranty in connection with the construction of the Improvements, including causes of action arising in tort, contract, fraud or concealment of a material fact; together with

(k)

All books and records pertaining to any and all of the property described above, including computer-readable memory and any computer hardware or software necessary to access and process such memory (“Books and Records”); together with

(l)

All proceeds of, additions and accretions to, substitutions and replacements for, and changes in any of the property described above.

1.2

Secured Obligations.

(a)

Mortgagor makes the grant, conveyance, and mortgage set forth in Section 1.1 above, and grants the security interest set forth in Section 3 below for the purpose of securing the following obligations (the “Secured Obligations”) in any order of priority that Mortgagee may choose:

I-3

(i)

Payment of all obligations at any time owing under the Notes under the terms of the Credit Agreement; and

(ii)

Payment and performance of all obligations of Mortgagor under this Mortgage; and

(iii)

Payment and performance of all other obligations of the Borrower and/or any other Guarantors under the other Loan Documents; and

(iv)

Payment and performance of all future advances and other obligations that Mortgagor or any successor in ownership of all or part of the Property may agree to pay and/or perform (whether as principal, surety or guarantor) for the benefit of Mortgagee, when a writing evidences the parties’ agreement that the advance or obligation be secured by this Mortgage; and

(v)

Payment and performance of all modifications, amendments, extensions, and renewals, however evidenced, of any of the Secured Obligations.

(b)

All persons who may have or acquire an interest in all or any part of the Property will be considered to have notice of, and will be bound by, the terms of the Secured Obligations and each other agreement or instrument made or entered into in connection with each of the Secured Obligations.  Such terms include any provisions in the Note or the Credit Agreement which permit borrowing, repayment and reborrowing, or which provide that the interest rate on one or more of the Secured Obligations may vary from time to time.

2.

Assignment of Rents.

2.1

Assignment.  Mortgagor hereby irrevocably, absolutely, presently and unconditionally assigns to Mortgagee all of Mortgagor’s title and interest, if any, in all existing and future Leases relating to the use and enjoyment of all or any part of the Premises and Improvements, and any and all guaranties and other agreements relating to or made in connection with any of such Leases.  Such assignment to Mortgagee shall not be construed to bind Mortgagee to the performance of any of the covenants, conditions or provisions contained in any such Leases or otherwise impose any obligation on Mortgagee. Mortgagor hereby irrevocably, absolutely, presently and unconditionally assigns to Mortgagee all rents, sublease rents, royalties, issues, profits, revenue, income, accounts, proceeds and other benefits of the Property, whether now due, past due or to become due, including all prepaid rents and security deposits, and i ncluding any termination payments under any Lease or sublease (some or all collectively, as the context may require, “Rents”).  This is an absolute assignment, not an assignment for security only.

2.2

Grant of License.  Mortgagee hereby confers upon Mortgagor a license (“License”) to collect and retain the Rents as they become due and payable, so long as no Default, as defined in Section 6.2 below, shall exist and be continuing.  If a Default has occurred and is continuing, Mortgagee shall have the right, which it may choose to exercise in its sole

I-4

discretion, to terminate this License without notice to or demand upon Mortgagor, and without regard to the adequacy of Mortgagee’s security under this Mortgage.

2.3

Collection and Application of Rents.  Subject to the License granted to Mortgagor under Section 2.2 above, Mortgagee has the right, power and authority to collect any and all Rents.  Mortgagor hereby appoints Mortgagee its attorney-in-fact to perform any and all of the following acts, if and at the times when Mortgagee in its sole discretion may so choose:

(a)

Demand, receive and enforce payment of any and all Rents; or

(b)

Give receipts, releases and satisfactions for any and all Rents; or

(c)

Sue either in the name of Mortgagor or in the name of Mortgagee for any and all Rents.

Mortgagee and Mortgagor agree that the mere recordation of the assignment granted herein entitles Mortgagee immediately to collect and receive rents upon the occurrence of a Default, as defined in Section 6.2, without first taking any acts of enforcement under applicable law, such as, but not limited to, providing notice to Mortgagor, filing foreclosure proceedings, or seeking and/or obtaining the appointment of a receiver.  Further, Mortgagee’s right to the Rents does not depend on whether or not Mortgagee takes possession of the Property as permitted under Subsection 6.3(c).  In Mortgagee’s sole discretion, Mortgagee may choose to collect Rents either with or without taking possession of the Property.  Mortgagee shall apply all Rents collected by it in the manner provided under Section 6.6.  If a Default occurs while Mortgagee is in possession of all or part of the Property and is collecting and applying Rents as permitted under this Mortgage, Mortgagee and any receiver shall  nevertheless be entitled to exercise and invoke every right and remedy afforded any of them under this Mortgage and at law or in equity.

2.4.

Mortgagee Not Responsible.  Under no circumstances shall Mortgagee have any duty to produce Rents from the Property.  Regardless of whether or not Mortgagee, in person or by agent, takes actual possession of the Premises and Improvements, unless Mortgagee agrees in writing to the contrary, Mortgagee is not and shall not be deemed to be:

(a)

A “mortgagee in possession” for any purpose; or

(b)

Responsible for performing any of the obligations of the lessor under any Lease; or

(c)

Responsible for any waste committed by lessees or any other parties, any dangerous or defective condition of the Property, or any negligence in the management, upkeep, repair or control of the Property, unless caused by the gross negligence, willful misconduct or bad faith of Mortgagee; or

(d)

Liable in any manner for the Property or the use, occupancy, enjoyment or operation of all or any part of it.

I-5

2.5

Leasing.  Mortgagor shall not accept any deposit or prepayment of rents under the Leases for any rental period exceeding one (1) month without Mortgagee’s prior written consent.  Mortgagor covenants and agrees that it shall not enter into, modify, waive or release any party from the performance or observance of any material obligation or condition, or terminate or accept the surrender, of any Lease (including, but not limited to, any guaranty, letter of credit or other credit support thereof) (each of the foregoing circumstances being a “Material Lease Event”) which affects any one space comprising 10,000 square feet or more of gross leaseable area (a “Major Lease”), without the prior written approval of Mortgagee in each instance, which approval shall not be unreasonably withheld.  Each request for approval shall be made in writing to Mortgagee and shall include the followi ng in all capital, bold and block letters:

“THE FOLLOWING REQUEST REQUIRES A RESPONSE WITHIN 15 DAYS OF RECEIPT.  FAILURE TO DO SO WILL BE DEEMED AN APPROVAL OF THE REQUEST.”

Failure of Mortgagee to approve or disapprove a Material Lease Event within fifteen (15) days after receipt of such written request and all documents and information reasonably required by Mortgagee, shall be deemed approval, provided that the written request for approval specifically mentioned the same as required above.

3.

Grant of Security Interest.

3.1

Security Agreement.  The parties intend for this Mortgage to create a lien on the Property, and an absolute assignment of the Leases and Rents, all in favor of Mortgagee.  The parties acknowledge that some of the Property and some or all of the Rents may be determined under applicable law to be personal property or fixtures.  To the extent that any Property, Leases or Rents may be or be determined to be personal property, Mortgagor as debtor hereby grants Mortgagee as secured party a security interest in all such Property, Leases and Rents, to secure payment and performance of the Secured Obligations.  This Mortgage constitutes a security agreement under the Uniform Commercial Code of the State in which the Property is located, covering all such Property, Leases and Rents.

3.2

Financing Statements.  Mortgagor hereby authorizes Mortgagee to file one or more financing statements.  In addition, Mortgagor shall execute such other documents as Mortgagee may from time to time require to perfect or continue the perfection of Mortgagee’s security interest in any Property, Leases or Rents.  As provided in Section 5.10 below, Mortgagor shall pay all fees and costs that Mortgagee may incur in filing such documents in public offices and in obtaining such record searches as Mortgagee may reasonably require.  In case Mortgagor fails to execute any financing statements or other documents for the perfection or continuation of any security interest, Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact to execute any such documents on its behalf.  If any financing statement or other document is filed in the records normally pertaining to personal property, th at filing shall never be construed as in any way derogating from or impairing this Mortgage or the rights or obligations of the parties under it.

I-6

4.

Fixture Filing.

This Mortgage constitutes a financing statement filed as a fixture filing under Article 9 of the Uniform Commercial Code in the State in which the Property is located, as amended or recodified from time to time, covering any Property which now is or later may become fixtures attached to the Premises or Improvements.  For this purpose, the respective addresses of Mortgagor, as debtor, and Mortgagee, as secured party, are as set forth in the preamble of this Mortgage.

5.

Rights and Duties of the Parties.

5.1

Representations and Warranties.  Mortgagor represents and warrants that:

(a)

Mortgagor lawfully possesses and holds fee simple title to all of the Premises and Improvements;

(b)

Mortgagor has or will have good title to all Property other than the Premises and Improvements;

(c)

Mortgagor has the full and unlimited power, right and authority to encumber the Property and assign the Rents;

(d)

This Mortgage creates a first and prior lien on the Property;

(e)

The Property includes all property and rights which may be reasonably necessary or desirable to promote the present and any reasonable future beneficial use and enjoyment of the Premises and Improvements;

(f)

Mortgagor owns any Property which is personal property free and clear of any security agreements, reservations of title or conditional sales contracts, and there is no financing statement affecting such personal property on file in any public office;

(g)

Mortgagor’s place of business, or its chief executive office if it has more than one place of business, is located at the address set forth in the preamble of this Mortgage;

(h)

There has been no material adverse change in the physical or financial condition of the Property since the most recent date on which Mortgagor delivered to Mortgagee rent rolls and other information regarding the physical and financial condition of the Property.

5.2

Taxes, and Assessments.  Mortgagor shall, prior to delinquency, pay or cause to be paid each installment of all taxes and special assessments of every kind, now or hereafter levied against the Property or any part thereof, without notice or demand, and shall provide Mortgagee with evidence of the payment of same upon the request of Mortgagee.  Mortgagor shall pay all taxes and assessments which may be levied upon Mortgagee’s or the Lenders’ interest herein or upon this Mortgage or the debt secured hereby (excluding any income taxes

I-7

or similar charges imposed upon Mortgagee or the Lenders), without regard to any law that may be enacted imposing payment of the whole or any part thereof upon the Mortgagee or any Lender.  Notwithstanding anything contained in this Section to the contrary, Mortgagor shall have the right to pay or cause to be paid any such tax or special assessment under protest or to otherwise contest any such tax or special assessment but only if (i) such contest has the effect of preventing the collection of such tax or special assessment so contested and also prevent the sale or forfeiture of the Property or any part thereof or any interest therein, (ii) Mortgagor promptly notifies Mortgagee in writing of its intent to contest such tax or special assessment, and (iii) if so requested in writing by Mortgagee, Mortgagor has deposited security in form and amount reasonably satisfactory to Mortgagee, and increases the amount of such security so deposited pr omptly after Mortgagee’s request therefor.  Mortgagor shall prosecute or cause the prosecution of all such contest actions in good faith and with due diligence and, promptly after request from Mortgagee, report to Mortgagee on the status and results of such contest actions. If any such contest action is unsuccessful Mortgagor shall promptly pay all sums determined to be due as required by the final order or ruling in such contest action and in any event such payment shall be made prior to the date on which the Property may be sold, lost or forfeited under any writ or order issued pursuant to such final order or ruling.

5.3

Performance of Secured Obligations.  Mortgagor shall promptly pay and perform each Secured Obligation in accordance with its terms.

5.4

Liens, Charges and Encumbrances.  Mortgagor shall not permit any lien, charge or encumbrance on or against the Property other than those permitted under clauses (i)-(iv) of Section 6.16 of the Credit Agreement and shall immediately discharge any such unpermitted lien, charge or encumbrance on the Property promptly after written demand from the Mortgagee.

5.5

Damages, Restoration, and Insurance Proceeds.  As long as no Default has occurred and is then continuing, all insurance proceeds for losses at the Property of less than $1,000,000.00 shall be adjusted with and payable to the Mortgagor.  In case of loss, Mortgagee shall have the right (but not the obligation) to participate in and reasonably approve the settlement of any insurance claim in excess of $1,000,000.00, and with respect to claims in excess of $1,000,000.00, Mortgagee is authorized to collect and receive any insurance money for such claims.

So long as no Default has occurred and is then continuing, and to the extent that either (i) Mortgagor is obligated to carry out such repair or restoration under one or more of the Leases or (ii) the costs of restoration do not exceed thirty percent (30%) of the value of the Improvements immediately prior to such casualty, the Mortgagee shall make such insurance proceeds available to pay for such costs of repair and restoration on a monthly basis during such repair and restoration. The Premises shall be so restored or rebuilt as to be substantially the same quality and character as the Premises were prior to such damage or destruction in accordance with the original plans and specifications or to such other condition as Mortgagee shall reasonably approve in writing. If the conditions to Mortgagee’s obligation to make such insurance proceeds are not satisfied, the Mortgagee shall have the right, if so directed b y the

I-8

Required Lenders, to apply such insurance proceeds to payment of the Secured Obligations, whether due or not.  .

If Mortgagee is holding any such insurance proceeds, any request by Mortgagor for a disbursement by Mortgagee of fire or casualty insurance proceeds or of funds deposited by Mortgagor with Mortgagee pursuant to this Section 5.5 shall be conditioned upon Borrower’s providing to Mortgagee: updated title insurance; satisfactory evidence, as reasonably determined by Mortgagee, that the Premises shall be so restored or rebuilt as to be of at least equal value and quality and substantially the same character as the Premises were prior to such damage or destruction in accordance with the original plans and specifications or to such other condition as Mortgagee shall reasonably approve in writing; satisfactory evidence of the estimated cost of completion thereof; and with such architect’s certificates, waivers of lien, contractors’ sworn statements and other evidence of cost and of payments as Mortgagee may r easonably require and approve.  The undisbursed balance of insurance proceeds shall at all times be sufficient to pay for the cost of completion of the work free and clear of liens and if such proceeds are insufficient, Mortgagor shall deposit the amount of such deficiency with Mortgagee prior to the disbursement by Mortgagee of any insurance proceeds.

5.6

Condemnation Proceeds.  Mortgagor hereby assigns, transfers and sets over unto Mortgagee its entire interest in the proceeds (the “Condemnation Proceeds”) of any award or any claim for damages for any of the Property taken or damaged under the power of eminent domain or by condemnation or any transaction in lieu of condemnation (“Condemnation”), unless, notwithstanding the foregoing, such taking, damage or condemnation does not cause a material diminution in the value of the Premises. So long as the portion of the Premises taken in such Condemnation does not exceed fifteen percent (15%) of the total square footage of the Premises and the portion of the Improvements taken in such Condemnation does not exceed five percent (5%) of the total gross leaseable area of the Improvements, Mortgagee shall be obligated to make the Condemnation Proceeds available to Mortgagor for the restoration of the Proper ty, if Mortgagor satisfies all of the conditions set forth in Section 5.5 hereof for disbursement of insurance proceeds.  In all other cases Mortgagee shall have the right, if so directed by the Required Lenders, to apply the Condemnation Proceeds to payment of the Secured Obligations, whether due or not.  If the Condemnation Proceeds are required to be used as aforesaid to reimburse Mortgagor for the cost of rebuilding or restoring buildings or improvements on the Property, or if Mortgagee elects that the Condemnation Proceeds be so used, and the buildings and other improvements shall be rebuilt or restored, the Condemnation Proceeds shall be paid out in the same manner as is provided in Section 5.5 hereof for the payment of insurance proceeds toward the cost of rebuilding or restoration of such buildings and other improvements.  Any surplus which may remain out of the Condemnation Proceeds after payment of such cost of rebuilding or restoration shall, at the option of Mortgagee, be appl ied on account of the indebtedness secured hereby or be paid to any other party entitled thereto.

5.7

Maintenance and Preservation of Property.

(a)

Mortgagor shall keep the Property in good condition and repair, ordinary wear and tear excepted, as provided in Section 6.8 of the Credit Agreement.

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(b)

Mortgagor shall not remove or demolish the Property or any material part of it in any way, or materially alter, restore or add to the Property, or initiate or allow any material change or variance in any zoning or other Premises use classification which adversely affects the Property or any material part of it, except with Mortgagee’s express prior written consent in each instance.

(c)

Mortgagor shall not commit or allow any act upon or use of the Property which would violate:  (i) any applicable Laws or order of any Governmental Authority, whether now existing or later to be enacted and whether foreseen or unforeseen; or (ii) any public or private covenant, condition, restriction or equitable servitude affecting the Property.  Mortgagor shall not bring or keep any article on the Property or cause or allow any condition to exist on it, if that could invalidate or would be prohibited by any insurance coverage required to be maintained by Mortgagor on the Property or any part of it under the Credit Agreement.

(d)

Mortgagor shall not commit or allow waste of the Property, including those acts or omissions characterized under the Credit Agreement as waste which arises out of Materials of Environmental Concern.

(e)

Mortgagor shall perform all other acts which from the character or use of the Property may be reasonably necessary to maintain and preserve its value.

(f)

Mortgagor shall insure the Property as required by Section 5.17 of the Credit Agreement and shall also carry worker’s compensation insurance as and to the extent required by law. During the term of the Credit Agreement, the premium on each such insurance policy shall be paid on or prior to the date when due and the policy term renewed annually in the same form and with at least the same coverage as the preceding year, with Mortgagee to receive notice of renewal at least thirty (30) days prior to expiration. Further, no such policy shall be subject to cancellation, nonrenewal or reduction of coverage unless the insurer has given Mortgagee at least thirty (30) days' (or in the case of non-payment of premium, ten (10) days) prior written notice of such action.  All policies described herein must be issued by insurance companies and agencies licensed by the Insurance Commission (or comparable agency) of the state in which the Property is located (the "State") to conduct business in the State and approved by Mortgagee.  Mortgagee shall have the right to approve each and every insurance carrier and policy (in form and content), such approval not to be unreasonably withheld. All policies shall include a standard, non-contributory mortgagee clause naming Mortgagee as additional insured under all liability insurance policies, as first mortgagee and loss payee on all property insurance policies and as the loss payee on all loss of rents insurance policies.

5.8

Releases, Extensions, Modifications and Additional Security.  From time to time, Mortgagee may perform any of the following acts without incurring any liability or giving notice to any person:

(a)

Release any person liable for payment of any Secured Obligation;

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(b)

Extend the time for payment, or otherwise alter the terms of payment, of any Secured Obligation;

(c)

Accept additional real or personal property of any kind as security for any Secured Obligation, whether evidenced by deeds of trust, mortgages, security agreements or any other instruments of security;

(d)

Alter, substitute or release any property securing the Secured Obligations;

(e)

Consent to the making of any plat or map of the Property or any part of it;

(f)

Join in granting any easement or creating any restriction affecting the Property; or

(g)

Join in any subordination or other agreement affecting this Mortgage or the lien of it; or

(h)

Release the Property or any part of it.

5.9

Release.  If (a) Borrower shall fully pay all principal and interest on the Notes, and all other indebtedness secured hereby and comply with all of the other terms and provisions hereof to be performed and complied with by Mortgagor, and terminate the obligations of the Lenders to make additional advances under the Credit Agreement; or (b) Borrower shall comply with the terms and conditions as set forth in Section 2.3(b) of the Credit Agreement for release of this Mortgage, Mortgagee, upon written request of Mortgagor stating that the requirements of either clause (a) or clause (b) above have been satisfied, shall release this Mortgage and the lien thereof by proper instrument upon payment and discharge of the amounts required under the Credit Agreement and payment of any filing fee in connection with such release.  Mortgagor shall pay any costs of preparation and recordation of such release.

5.10

Compensation, Exculpation, Indemnification.

(a)

Mortgagor agrees to pay fees required by and pursuant to the Credit Agreement, for any services that Mortgagee may render in connection with this Mortgage, including Mortgagee’s providing a statement of the Secured Obligations or providing the release pursuant to Section 5.9 above.  Mortgagor shall also pay or reimburse all of Mortgagee’s costs and expenses which may be incurred in rendering any such services.  Mortgagor further agrees to pay or reimburse Mortgagee for all costs, expenses and other advances which may be incurred or made by Mortgagee in any efforts to enforce any terms of this Mortgage, including any rights or remedies afforded to Mortgagee under Section 6.3, whether any lawsuit is filed or not, or in defending any action or proceeding arising under or relating to this Mortgage, including attorneys’ fees and other legal costs, costs of any Foreclosur e Sale (as defined in Subsection 6.3(i) below) and any cost of evidence of title.  If Mortgagee chooses to dispose of Property through more than one Foreclosure Sale, Mortgagor shall pay all costs, expenses or other advances that may be incurred or made by Mortgagee in each

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of such Foreclosure Sales.  In any suit to foreclose the lien hereof or enforce any other remedy of Mortgagee under this Mortgage or the Note, there shall be allowed and included as additional indebtedness in the decree for sale or other judgment or decree all expenditures and expenses which may be paid or incurred by or on behalf of Mortgagee for attorneys’ costs and fees (including the costs and fees of paralegals), survey charges, appraiser’s fees, inspecting engineer’s and/or architect’s fees, fees for environmental studies and assessments and all additional expenses incurred by Mortgagee with respect to environmental matters, outlays for documentary and expert evidence, stenographers’ charges, publication costs, and costs (which may be estimated as to items to be expended after entry of the decree) of procuring all such abstracts of title, title searches and examinations, title insurance poli cies, and similar data and assurances with respect to title as Mortgagee may deem reasonably necessary either to prosecute such suit or to evidence to bidders at any sale which may be had pursuant to such decree the true condition  of the title to, the value of or the environmental condition of the Property.  All expenditures and expenses of the nature in this Subsection mentioned, and such expenses and fees as may be incurred in the protection of the Property and maintenance of the lien of this Mortgage, including the fees of any attorney (including the costs and fees of paralegals) employed by Mortgagee in any litigation or proceeding affecting this Mortgage, the Note or the Property, including probate and bankruptcy proceedings, or in preparation for the commencement or defense of any proceeding or threatened suit or proceeding, shall be immediately due and payable by Mortgagor, with interest thereon at the Default Rate applicable to Floating Rate Advances and shall be secured by this Mortgage.< /P>

(b)

Mortgagee shall not be directly or indirectly liable to Mortgagor or any other person as a consequence of any of the following:

(i)

Mortgagee’s exercise of or failure to exercise any rights, remedies or powers granted to Mortgagee in this Mortgage;

(ii)

Mortgagee’s failure or refusal to perform or discharge any obligation or liability of Mortgagor under any agreement related to the Property or under this Mortgage; or

(iii)

Any loss sustained by Mortgagor or any third party resulting from Mortgagee’s failure to lease the Property, or from any other act or omission of Mortgagee in managing the Property, after a Default, unless the loss is caused by the willful misconduct, gross negligence, or bad faith of Mortgagee.

Mortgagor hereby expressly waives and releases all liability of the types described above, and agrees that no such liability shall be asserted against or imposed upon Mortgagee.

(c)

Mortgagor agrees to indemnify Mortgagee against and hold it harmless from all losses, damages, liabilities, claims, causes of action, judgments, court costs, attorneys’ fees and other legal expenses, cost of evidence of title, cost of evidence of

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value, and other costs and expenses which it may suffer or incur, unless caused by the negligence, willful misconduct or bad faith of the Mortgagee:

(i)

In performing any act required or permitted by this Mortgage or any of the other Loan Documents or by law;

(ii)

Because of any failure of Mortgagor to perform any of its obligations; or

(iii)

Because of any alleged obligation of or undertaking by Mortgagee to perform or discharge any of the representations, warranties, conditions, covenants or other obligations in any document relating to the Property other than the Loan Documents.

This agreement by Mortgagor to indemnify Mortgagee shall survive the release and cancellation of any or all of the Secured Obligations and the full or partial release of this Mortgage.

(d)

Mortgagor shall pay all obligations to pay money arising under this Section 5.10 immediately upon demand by Mortgagee.  Each such obligation shall be added to, and considered to be part of, the principal of the Note, and shall bear interest from the date the obligation arises at the Default Rate applicable to Floating Rate Advances.

5.11

Defense and Notice of Claims and Actions.  At Mortgagor’s sole expense, Mortgagor shall protect, preserve and defend the Property and title to and right of possession of the Property, and the security of this Mortgage and the rights and powers of Mortgagee created under it, against all adverse claims.  Mortgagor shall give Mortgagee prompt notice in writing if any claim is asserted which does or could affect any such matters, or if any action or proceeding is commenced which alleges or relates to any such claim.

5.12

Subrogation.  Mortgagee shall be subrogated to the liens of all encumbrances, whether released of record or not, which are discharged in whole or in part by Mortgagee in accordance with this Mortgage or with the proceeds of any loan secured by this Mortgage.

5.13

Site Visits, Observation and Testing.  Mortgagee and its agents and representatives shall have the right to enter and visit the Property in accordance with the terms of Section 6.9 of the Credit Agreement for the purpose of performing appraisals, observing the Property, and conducting non-invasive tests (unless Mortgagee has a good faith reason to believe that the taking and removing soil or groundwater samples is required, and in such case, conducting such tests) on any part of the Property.  Mortgagee has no duty, however, to visit or observe the Property or to conduct tests, and no site visit, observation or testing by Mortgagee, its agents or representatives shall impose any liability on any of Mortgagee, its agents or representatives.  In no event shall any site visit, observation or testing by Mortgagee, its agents or representatives be a representation that Materials of Environmental Concern are or are not present in, on or under the Property, or that there has been or shall be compliance with any law, regulation or ordinance pertaining to Materials of Environmental Concern or any other

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applicable governmental law.  Neither Mortgagor nor any other party is entitled to rely on any site visit, observation or testing by any of Mortgagee, its agents or representatives.  Neither Mortgagee, its agents or representatives owe any duty of care to protect Mortgagor or any other party against, or to inform  Mortgagor or any other party of, any Materials of Environmental Concern or any other adverse condition affecting the Property.  Mortgagee shall give Mortgagor reasonable notice before entering the Property.  Mortgagee shall make reasonable efforts to avoid interfering with Mortgagor’s use of the Property in exercising any rights provided in this Section 5.13.  Notwithstanding the foregoing, all rights granted to Mortgagee under this Section 5.13 are subject to all rights of tenants to the Property.

5.14

Notice of Change.  Mortgagor shall give Mortgagee prior written notice of any change in:  (a) the location of its place of business or its chief executive office if it has more than one place of business; (b) the location of any of the Property, including the Books and Records; and (c) Mortgagor’s name or business structure.  Unless otherwise approved by Mortgagee in writing, all Property that consists of personal property (other than the Books and Records) will be located on the Premises and all Books and Records will be located at Mortgagor’s place of business or chief executive office if Mortgagor has more than one place of business.

6.

Transfers, Default and Remedies.

6.1

Transfers.  Mortgagor acknowledges that Mortgagee is making one or more advances under the Credit Agreement in reliance on the expertise, skill and experience of Mortgagor; thus, the Secured Obligations include material elements similar in nature to a personal service contract.  In consideration of Mortgagee’s reliance, Mortgagor agrees that Mortgagor shall not make any transfer of the Property or transfer of its interests therein, except for leases in the ordinary course (a “Transfer”), unless the Transfer is preceded by Mortgagee’s express written consent to the particular transaction and transferee.  Mortgagee may withhold such consent in its sole discretion.

In addition, Mortgagor is not required to first obtain Mortgagee’s written consent before entering into a grant, restriction, covenant or easement affecting the Property (collectively, “Grant”) in the ordinary course of business for access, parking, utilities or a similar purpose, provided such easement does not materially adversely affect the utility, operation or value of the Property.   In connection with any such permitted Grant, if requested in writing, Mortgagee shall within ten (10) business days of receipt of such request accompanied by a copy of the instrument creating the Grant, execute an instrument in reasonable form to subordinate the lien of the Mortgage to such Grant.

6.2

Events of Default.  Mortgagor will be in default under this Mortgage upon the occurrence of any one or more of the following events (each a “Default”):

(i)

If a default shall occur with respect to covenants, agreements and obligations of Mortgagor under this Mortgage involving the payment of money and shall continue for a period of five (5) business days after the due date thereof; or

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(ii)

If there is a failure to perform or observe any of the other covenants, agreements and conditions contained in this Mortgage in accordance with the terms hereof, and such default continues unremedied for a period of thirty (30) days after written notice from Mortgagee to Mortgagor of the occurrence thereof;

(iii)

A “Default” (as defined in the Credit Agreement) occurs under the Credit Agreement.

6.3

Remedies.  At any time after a Default, Mortgagee shall be entitled to invoke any and all of the rights and remedies described below, in addition to all other rights and remedies available to Mortgagee at law or in equity.  All of such rights and remedies shall be cumulative, and the exercise of any one or more of them shall not constitute an election of remedies.

(a)

Acceleration.  Upon the occurrence and continuation of any Default, the whole of said principal sum hereby secured shall, either automatically or at the election of Mortgagee as described in Section 8.1 of the Credit Agreement, become immediately due and payable, together with accrued interest thereon, without any presentment, demand, protest or notice of any kind to Mortgagor.

(b)

Receiver.  Mortgagee shall, as a matter of right, without notice and without giving bond to Mortgagor or anyone claiming by, under or through Mortgagor, and without regard for the solvency or insolvency of Mortgagor or the then value of the Property, to the extent permitted by applicable law, be entitled to have a receiver appointed for all or any part of the Property and the Rents, and the proceeds, issues and profits thereof, with the rights and powers referenced below and such other rights and powers as the court making such appointment shall confer, and Mortgagor hereby consents to the appointment of such receiver and shall not oppose any such appointment.  Such receiver shall have all powers and duties prescribed by applicable law, all other powers which are necessary or usual in such cases for the protection, possession, control, management and operation of the Property, and such rights and powers as Mortgagee would have, upon entering and taking possession of the Property under subsection (c) below.

(c)

Entry.  Mortgagee, in person, by agent or by court-appointed receiver, may enter, take possession of, manage and operate all or any part of the Property, and may also do any and all other things in connection with those actions that Mortgagee may in its sole discretion consider necessary and appropriate to protect the security of  this Mortgage.  Such other things may include:  taking and possessing all of Mortgagor’s or the then owner’s Books and Records; entering into, enforcing, modifying or canceling Leases on such terms and conditions as Mortgagee may consider proper; obtaining and evicting tenants; fixing or modifying Rents; collecting and receiving any payment of money owing to Mortgagee; completing any unfinished construction; and/or contracting for and making repairs and alterations.  If Mortgagee so requests, Mortgagor shall assemble all of the Property that has been removed from the Premises and make all of it available to Mortgagee at the site of the Premises.  Mortgagor hereby irrevocably

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constitutes and appoints Mortgagee as Mortgagor’s attorney-in-fact to perform such acts and execute such documents as Mortgagee in its sole discretion may consider to be appropriate in connection with taking these measures, including endorsement of Mortgagor’s name on any instruments.

(d)

Cure; Protection of Security.  Mortgagee may cure any breach or default of Mortgagor, and if it chooses to do so in connection with any such cure, Mortgagee may also enter the Property and/or do any and all other things which it may in its sole discretion consider necessary and appropriate to protect the security of this Mortgage.  Such other things may include: appearing in and/or defending any action or proceeding which purports to affect the security of, or the rights or powers of Mortgagee under, this Mortgage; paying, purchasing, contesting or compromising any encumbrance, charge, lien or claim of lien which in Mortgagee’s sole judgment is or may be senior in priority to this Mortgage, such judgment of Mortgagee or to be conclusive as among the parties to this Mortgage; obtaining insurance and/or paying any premiums or charges for insurance required to be carried under the Credit Ag reement; otherwise caring for and protecting any and all of the Property; and/or employing counsel, accountants, contractors and other appropriate persons to assist Mortgagee.  Mortgagee may take any of the actions permitted under this Subsection 6.3(d) either with or without giving notice to any person.  Any amounts expended by Mortgagee under this Subsection 6.3(d) shall be secured by this Mortgage and the other Loan Documents.

(e)

Uniform Commercial Code Remedies.  Mortgagee may exercise any or all of the remedies granted to a secured party under the Uniform Commercial Code in the State in which the Property is located.

(f)

Foreclosure; Lawsuits.  Mortgagee shall have the right, in one or several concurrent or consecutive proceedings, to foreclose the lien hereof upon the Property or any part thereof, for the Secured Obligations, or any part thereof, by any proceedings appropriate under applicable law.  Mortgagee or its nominee may bid and become the purchaser of all or any part of the Property at any foreclosure or other sale hereunder, and the amount of Mortgagee’s successful bid shall be credited on the Secured Obligations.  Without limiting the foregoing, Mortgagee may proceed by a suit or suits in law or equity, whether for specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or for any foreclosure under the judgment or decree of any court of competent jurisdiction.  In addition to the right provided in Subsection 6.3(b) , upon, or at any time after the filing of a complaint to foreclose this Mortgage, Mortgagee shall be entitled to the appointment of a receiver of the property by the court in which such complaint is filed, and Mortgagor hereby consents to such appointment.

(g)

Other Remedies.  Mortgagee may exercise all rights and remedies contained in any other instrument, document, agreement or other writing heretofore, concurrently or in the future executed by Mortgagor or any other person or entity in favor of Mortgagee in connection with the Secured Obligations or any part thereof, without prejudice to the right of Mortgagee thereafter to enforce any appropriate remedy against

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Mortgagor.  Mortgagee shall have the right to pursue all remedies afforded to a mortgagee under applicable law, and shall have the benefit of all of the provisions of such applicable law, including all amendments thereto which may become effective from time to time after the date hereof.

(h)

Sale of Personal Property.  Mortgagee shall have the discretionary right to cause some or all of the Property, which constitutes personal property, to be sold or otherwise disposed of in any combination and in any manner permitted by applicable law.

(i)

For purposes of this power of sale, Mortgagee may elect to treat as personal property any Property which is intangible or which can be severed from the Premises or Improvements without causing structural damage.  If it chooses to do so, Mortgagee may dispose of any personal property, in any manner permitted by Article 9 of the Uniform Commercial Code of the State in which the Property is located, including any public or private sale, or in any manner permitted by any other applicable law.

(ii)

In connection with any sale or other disposition of such Property, Mortgagor agrees that the following procedures constitute a commercially reasonable sale:  Mortgagee shall mail written notice of the sale to Mortgagor not later than thirty (30) days prior to such sale.  Mortgagee will publish notice of the sale in a local daily newspaper of general circulation.  Upon receipt of any written request, Mortgagee will make the Property available to any bona fide prospective purchaser for inspection during reasonable business hours.  Notwithstanding, Mortgagee shall be under no obligation to consummate a sale if, in its judgment, none of the offers received by it equals the fair value of the Property offered for sale.  The foregoing procedures do not constitute the only procedures that may be commercially reasonable.

(i)

Single or Multiple Foreclosure Sales.  If the Property consists of more than one lot, parcel or item of property,  Mortgagee may:

(i)

Designate the order in which the lots, parcels and/or items shall be sold or disposed of or offered for sale or disposition; and

(ii)

Elect to dispose of the lots, parcels and/or items through a single consolidated sale or disposition to be held or made under or in connection with judicial proceedings, or by virtue of a judgment and decree of foreclosure and sale; or through two or more such sales or dispositions; or in any other manner Mortgagee may deem to be in its best interests (any such sale or disposition, a “Foreclosure Sale;” and any two or more, “Foreclosure Sales”).

If Mortgagee chooses to have more than one Foreclosure Sale, Mortgagee at its option may cause the Foreclosure Sales to be held simultaneously or successively, on the same day, or on such different days and at such different

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times and in such order as Mortgagee may deem to be in its best interests.  No Foreclosure Sale shall terminate or affect the liens of this Mortgage on any part of the Property which has not been sold, until all of the Secured Obligations have been paid in full.

6.4

Credit Bids.  At any Foreclosure Sale, any person, including Mortgagor or Mortgagee, may bid for and acquire the Property or any part of it to the extent permitted by then applicable law.  Instead of paying cash for such property, Mortgagee may settle for the purchase price by crediting the sales price of the property against the following obligations:

(a)

First, the portion of the Secured Obligations attributable to the expenses of sale, costs of any action and any other sums for which Mortgagor is obligated to pay or reimburse Mortgagee under Section 5.10 of this Mortgage; and

(b)

Second, all other Secured Obligations in any order and proportions as Mortgagee in its sole discretion may choose.

6.5

Application of Foreclosure Sale Proceeds.  Mortgagee shall apply the proceeds of any Foreclosure Sale in the following manner:

(a)

First, to pay the portion of the Secured Obligations attributable to the expenses of sale, costs of any action and any other sums for which Mortgagor is obligated to reimburse Mortgagee under Section 5.10 of this Mortgage;

(b)

Second, to pay the portion of the Secured Obligations attributable to any sums expended or advanced by Mortgagee under the terms of this Mortgage which then remain unpaid;

(c)

Third, to pay all other Secured Obligations in any order and proportions as Mortgagee in its sole discretion may choose; and

(d)

Fourth, to remit the remainder, if any, to the person or persons entitled to it.

6.6

Application of Rents and Other Sums.  Mortgagee shall apply any and all Rents collected by it, and any and all sums other than proceeds of a Foreclosure Sale which Mortgagee may receive or collect under Section 6.3 above, in the following manner:

(a)

First, to pay the portion of the Secured Obligations attributable to the costs and expenses of operation and collection that may be incurred by Mortgagee or any receiver;

(b)

Second, to pay all other Secured Obligations in any order and proportions as Mortgagee in its sole discretion may choose; and

(c)

Third, to remit the remainder, if any, to the person or persons entitled to it.

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Mortgagee shall have no liability for any funds which it does not actually receive.

7.

Miscellaneous Provisions.

7.1

Additional Provisions.  The Loan Documents fully state all of the terms and conditions of the parties’ agreement regarding the matters mentioned in or incidental to this Mortgage.  The Loan Documents also grant further rights to Mortgagee and contain further agreements and affirmative and negative covenants by Borrower and Mortgagor which apply to this Mortgage and to the Property.

7.2

No Waiver or Cure.

(a)

Each waiver by Mortgagee must be in writing, and no waiver shall be construed as a continuing waiver.  No waiver shall be implied from any delay or failure by Mortgagee to take action on account of any default of Mortgagor.  Consent by Mortgagee to any act or omission by Mortgagor shall not be construed as a consent to any other or subsequent act or omission or to waive the requirement for Mortgagee’s consent to be obtained in  any future or other instance.

(b)

If any of the events described below occurs, that event alone shall not:  cure or waive any breach, Default or notice of default under this Mortgage or invalidate any act performed pursuant to any such default or notice; or nullify the effect of any notice of default or sale (unless all Secured Obligations then due have been paid and performed and all other defaults under the Loan Documents have been cured); or impair the security of this Mortgage; or prejudice Mortgagee or any receiver in the exercise of any right or remedy afforded any of them under this Mortgage; or be construed as an affirmation by Mortgagee of any tenancy, lease or option, or a subordination of the lien of this Mortgage.

(i)

Mortgagee, its agent or a receiver takes possession of all or any part of the Property in the manner provided in Subsection 6.3(c).

(ii)

Mortgagee collects and applies Rents as permitted under Sections 2.3 and 6.6 above, either with or without taking possession of all or any part of the Property.

(iii)

Mortgagee receives and applies to any Secured Obligation any proceeds of any Property, including any proceeds of insurance policies, condemnation awards, or other claims, property or rights assigned to Mortgagee under Section 5.5 and Section 5.6 above.

(iv)

Mortgagee makes a site visit, observes the Property and/or conducts tests as permitted under Section 5.13 above.

(v)

Mortgagee receives any sums under this Mortgage or any proceeds of any collateral held for any of the Secured Obligations, and applies them to one or more Secured Obligations.

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(vi)

Mortgagee or any receiver invokes any right or remedy provided under this Mortgage.

7.3

Powers of Mortgagee.

(a)

If Mortgagee performs any act which it is empowered or authorized to perform under this Mortgage, including any act permitted by Section 5.8 or Subsection 6.3(d) of this Mortgage, that act alone shall not release or change the personal liability of any person for the payment and performance of the Secured Obligations then outstanding, or the lien of this Mortgage on all or the remainder of the Property for full payment and performance of all outstanding Secured Obligations.  The liability of the original Mortgagor shall not be released or changed if Mortgagee grants any successor in interest to Mortgagor any extension of time for payment, or modification of the terms of payment, of any Secured Obligation.  Mortgagee shall not be required to comply with any demand by the original Mortgagor that Mortgagee refuse to grant such an extension or modification to, or commence proce edings against, any such successor in interest.

(b)

Mortgagee may take any of the actions permitted under Subsections 6.3(b) and/or 6.3(c) regardless of the adequacy of the security for the Secured Obligations, or whether any or all of the Secured Obligations have been declared to be immediately due and payable, or whether notice of default and election to sell has been given under this Mortgage.

(c)

From time to time, Mortgagee may apply to any court of competent jurisdiction for aid and direction in executing and enforcing the rights and remedies created under this Mortgage.  Mortgagee may from time to time obtain orders or decrees directing, confirming or approving acts in executing and enforcing these rights and remedies.

7.4

Merger.  No merger shall occur as a result of Mortgagee’s acquiring any other estate in or any other lien on the Property unless Mortgagee consents to a merger in writing.

7.5

Joint and Several Liability.  If Mortgagor consists of more than one person, each shall be jointly and severally liable for the faithful performance of all of Mortgagor’s obligations under this Mortgage.

7.6

Applicable Law. The creation, perfection and enforcement of the lien of this Mortgage shall be governed by the law of the State in which the Property is located.  Subject to the foregoing, in all other respects, this Mortgage shall be governed by the substantive laws of the State of Illinois.

7.7

Successors in Interest.  The terms, covenants and conditions of this Mortgage shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties.  However, this Section 7.7 does not waive the provisions of Section 6.1 above.

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7.8

Interpretation.

(a)

Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender.  The captions of the sections of this Mortgage are for convenience only and do not define or limit any terms or provisions.  The word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.”

(b)

The word “obligations” is used in its broadest and most comprehensive sense, and includes all primary,  secondary, direct, indirect, fixed and contingent obligations.  It further includes all principal, interest, prepayment charges, late charges, loan fees and any other fees and charges accruing or assessed at any time, as well as all obligations to perform acts or satisfy conditions.

(c)

No listing of specific instances, items or matters in any way limits the scope or generality of any language of this Mortgage.  The Exhibits to this Mortgage are hereby incorporated in this Mortgage.

7.9

Waiver of Statutory Rights.  To the extent permitted by law, Mortgagor hereby agrees that it shall not and will not apply for or avail itself of any appraisement, valuation, stay, extension or exemption laws, or any so-called “Moratorium Laws,” now existing or hereafter enacted, in order to prevent or hinder the enforcement or foreclosure of this Mortgage, but hereby waives the benefit of such laws.  Mortgagor for itself and all who may claim through or under it waives any and all right to have the property and estates comprising the Property marshaled upon any foreclosure of the lien hereof and agrees that any court having jurisdiction to foreclose such lien may order the Property sold as an entirety. Mortgagor hereby waives any and all rights of redemption from sale under any judgment of foreclosure of this Mortgage on behalf of Mortgagor and on behalf of each and every person acquiring any interest in or title to the Property of any nature whatsoever, subsequent to the date of this Mortgage.  The foregoing waiver of right of redemption is made pursuant to the provisions of applicable law.

7.10

Severability.  If any provision of this Mortgage should be held unenforceable or void, that provision shall be deemed severable from the remaining provisions and shall in no way affect the validity of this Mortgage except that if such provision relates to the payment of any monetary sum, then Mortgagee may, at its option, declare all Secured Obligations immediately due and payable.

7.11

Notices. Any notice, demand, request or other communication which any party hereto may be required or may desire to give hereunder shall be in writing and shall be deemed to have been properly given if given in accordance with Section 13.1 of the Credit Agreement and Section 13 of the Guaranty.

Any notice or demand delivered to the person or entity named above to accept notices and demands for Mortgagor shall constitute notice or demand duly delivered to Mortgagor, even if delivery is refused.

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7.12

Future Advances. This Mortgage is given to, and the parties intend that it shall secure indebtedness, exclusive of interest thereon, in a maximum amount equal to the Aggregate Commitment from time to time under the Credit Agreement which shall be an amount up to $585,000,000 which indebtedness may include advances made at the request of Borrower or Mortgagor or its respective successor(s) in title after this Mortgage is filed of record to the fullest extent and with the highest priority contemplated by law (including disbursements that the Lenders may, but shall not be obligated to, make under this Mortgage, the Loan Documents or any other document with respect thereto) plus interest thereon, and any disbursements made for the enforcement of this Mortgage and any remedies hereunder, payment of taxes, special assessments, utilities or insurance on the Property and interest on such disbursements and all disbursements by Mo rtgagee pursuant to applicable law (all such indebtedness being hereinafter referred to as the maximum amount secured hereby). This Mortgage shall be valid and have priority to the extent of the maximum amount secured hereby over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the Property given priority by law.  All future advances under the Credit Agreement, the Notes, this Mortgage and the other Loan Documents shall have the same priority as if the future advance was made on the date that this Mortgage was recorded.

7.13

Mortgagee’s Lien for Service Charge and Expenses.  At all times, regardless of whether any Loan proceeds have been disbursed, this Mortgage secures the payment of any and all loan commissions, service charges, liquidated damages, expenses and advances due to or incurred by Mortgagee not to exceed the maximum amount secured hereby.

7.14

Advances.  A portion of the loan evidenced by the Notes is a “revolving credit loan”.  The lien of the Mortgage shall secure all advances made pursuant to the terms of the Agreement to the same extent as if such future advances were made on the date of execution of the Mortgage, provided that such advances are made within twenty (20) years from the date hereof.  Although there may be no indebtedness outstanding on the Note at the time any such advance is made, the lien of the Mortgage as to third persons without actual notice thereof, shall be valid as to all such indebtedness and future advances from the time this Mortgage is filed for record.  The total amount of the indebtedness evidenced by the Notes and secured by the Mortgage may increase or decrease from time to time, but the total unpaid balance so secured at any one time shall not exceed the maximum amount specified in Section 7.12 plus interest thereon and any disbursements made for the payment of taxes, special assessments, insurance or other disbursements made pursuant to the terms of this Mortgage, the Credit Agreement, or the other Loan Documents.

7.15

WAIVER OF TRIAL BY JURY.  MORTGAGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS MORTGAGE, THE NOTE, OR ANY OF THE OTHER LOAN DOCUMENTS, THE LOAN OR ANY OTHER STATEMENTS OR ACTIONS OF MORTGAGOR OR MORTGAGEE.  MORTGAGOR ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS MORTGAGE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS DISCUSSED THIS WAIVER WITH SUCH LEGAL COUNSEL.  MORTGAGOR FURTHER ACKNOWLEDGES

I-22

THAT (i) IT HAS READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (ii) THIS WAIVER IS A MATERIAL INDUCEMENT FOR MORTGAGEE TO MAKE THE LOAN, ENTER INTO THIS MORTGAGE AND EACH OF THE OTHER LOAN DOCUMENTS, AND (iii) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH OTHER LOAN DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

7.16

Incorporation of Credit Agreement.  The terms and provisions of the Credit Agreement are incorporated herein by express reference.  All advances and indebtedness arising and accruing under the Credit Agreement from time to time, whether or not the resulting indebtedness secured hereby may exceed the face amount of the Notes, shall be secured hereby to the same extent as though said Credit Agreement were fully incorporated in this Mortgage, and the occurrence of any Default under said Credit Agreement shall constitute a Default under this Mortgage entitling Mortgagee to all of the rights and remedies conferred upon Mortgagee by the terms of both this Mortgage and the Credit Agreement.  Mortgagor hereby agrees to comply with all covenants and fulfill all obligations set forth in the Credit Agreement which pertain to the Premises as if Mortgagor were a party to such documents.  In the event of any confli ct or inconsistency between the terms of this Mortgage and the Credit Agreement, the terms and provisions of the Credit Agreement shall in each instance govern and control.

7.17

Inconsistencies.  In the event of any inconsistency between this Mortgage and the Credit Agreement, the terms hereof shall be controlling as necessary to create, preserve and/or maintain a valid security interest upon the Property, otherwise the provisions of the Credit Agreement shall be controlling.

7.18

Partial Invalidity; Maximum Allowable Rate of Interest.  Mortgagor and Mortgagee intend and believe that each provision in this Mortgage and the Notes comports with all applicable local, state and federal laws and judicial decisions.  However, if any provision or provisions, or if any portion of any provision or provisions, in this Mortgage or the Notes is found by a court of law to be in violation of any applicable local, state or federal ordinance, statute, law, administrative or judicial decision, or public policy, and if such court should declare such portion, provision or provisions of this Mortgage and the Notes to be illegal, invalid, unlawful, void or unenforceable as written, then it is the intent both of Mortgagor and Mortgagee that such portion, provision or provisions shall be given force to the fullest possible extent that they are legal, valid and enforceable, that the remainder of this Mortgage a nd the Notes shall be construed as if such illegal, invalid, unlawful, void or unenforceable portion, provision or provisions were not contained therein, and that the rights, obligations and interest of Mortgagor and Mortgagee under the remainder of this Mortgage and the Notes shall continue in full force and effect.  All agreements herein and in the Notes are expressly limited so that in no contingency or event whatsoever, whether by reason of advancement of the proceeds hereof, acceleration of maturity of the unpaid principal balance of the Notes, or otherwise, shall the amount paid or agreed to be paid to the Lenders for the use, forbearance or detention of the money to be advanced hereunder exceed the highest lawful rate permissible under applicable usury laws.  If, from any circumstances whatsoever, fulfillment of any provision hereof or of the Notes or any other agreement referred to herein, at the time performance of such provision shall be due, shall involve transcending the limit of validi ty prescribed by law which a court of competent jurisdiction may deem applicable hereto, then, ipso facto, the obligation to be fulfilled

I-23

shall be reduced to the limit of such validity and if from any circumstance the Lenders shall ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due under the Notes and not to the payment of interest.

7.19

UCC Financing Statements.  Mortgagor hereby authorizes Mortgagee to file UCC financing statements to perfect Mortgagee’s security interest in any part of the Property.  In addition, Mortgagor agrees to sign any and all other documents that Mortgagee deems necessary in its sole discretion to perfect, protect, and continue Mortgagee’s lien and security interest on the Property.

7.20

Declaration of Subordination.  At the option of Mortgagee, this Mortgage shall become subject and subordinate, in whole or in part (but not with respect to priority of entitlement to insurance proceeds or any Condemnation Proceeds), to any and all Leases of all or any part of the Premises upon the execution by Mortgagee and recording thereof, at any time hereafter in the appropriate official records of the County wherein the Premises are situated, of a unilateral declaration to that effect.

7.21

Certain Matters Relating to the State.  Notwithstanding anything contained herein to the contrary the provisions contained in the Rider attached hereto as Exhibit B (the “Rider”) are incorporated by reference as if fully set forth herein.  If there is any inconsistency between the terms contained in this Mortgage and the terms contained in the Rider, the terms in the Rider shall prevail.

[remainder of this page intentionally left blank]

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IN WITNESS WHEREOF, Mortgagor has executed this Mortgage as of the date first above written.

Mortgagor:

INLAND WESTERN

, L.L.C.,

a [Delaware limited liability company]

By:

Inland Western Retail Real Estate Trust, Inc..

a Maryland corporation, its sole member

By:

Its:

I-25

STATE OF _____________

)

)  ss.:

COUNTY OF ___________

)

On this _____ day of [____________], 2011, before me personally came _____________________, to me known, who, being by me duly sworn, did depose and say that s/he is the __________ of INLAND WESTERN RETAIL REAL ESTATE TRUST, INC., a Maryland Corporation, as the sole member of INLAND WESTERN       , L.L.C., a [Delaware limited liability company], the limited liability company described in and which executed the foregoing instrument; and that s/he signed his name thereto as the authorized act of said corporation in its capacity as sole member of said limited liability company.

Notary Public in and for said
County and State

My Commission Expires:

PREPARED BY AND UPON
RECORDATION RETURN TO:

SNR DENTON US LLP
233 South Wacker Drive, Suite 7800
Chicago, Illinois 60606
Attention:  Patrick G. Moran, Esq.

I-26

EXHIBIT A

DESCRIPTION OF PREMISES

Parcel ID:

Street Address:

I-27

EXHIBIT B

SPECIFIC STATE PROVISIONS RIDER

Principles of Construction.  In the event of any inconsistencies between the terms and conditions of this Exhibit B and the other terms and conditions of this Mortgage, the terms and conditions of this Exhibit B shall control and be binding.

I-28

EXHIBIT J

ASSIGNMENT AGREEMENT

This Assignment Agreement (this “Assignment Agreement”) between KEYBANK NATIONAL ASSOCIATION (the “Assignor”) and _________________________ (the “Assignee”) is dated as of _____________, 20__.  The parties hereto agree as follows:

1.

PRELIMINARY STATEMENT.  The Assignor is a party to an Amended and Restated Credit Agreement dated February 4, 2011 (which, as it may be amended, modified, renewed or extended from time to time is herein called the “Credit Agreement”) described in Item 1 of Schedule 1 attached hereto (“Schedule 1”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement.

2.

ASSIGNMENT AND ASSUMPTION.  The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to the Assignor’s rights and obligations under the Credit Agreement such that after giving effect to such assignment the Assignee shall have purchased pursuant to this Assignment Agreement the percentage interest specified in Item 3 of Schedule 1 of all outstanding rights and obligations under the Credit Agreement and the other Loan Documents.  The Commitment purchased by the Assignee hereunder is set forth in Item 4 of Schedule 1.

3.

EFFECTIVE DATE.  The effective date of this Assignment Agreement (the “Effective Date”) shall be the later of the date specified in Item 5 of Schedule 1 or two (2) Business Days (or such shorter period agreed to by the Agent) after a Notice of Assignment substantially in the form of Exhibit “I” attached hereto has been delivered to the Agent.  Such Notice of Assignment must include the consent of the Agent required by Section 12.3(i) of the Credit Agreement.  In no event will the Effective Date occur if the payments required to be made by the Assignee to the Assignor on the Effective Date under Section 4 hereof are not made on the proposed Effective Date.  The Assignor will notify the Assignee of the proposed Effective Date no later than the Business Day prior to the proposed Effective Date.  As of the Effective Date, (i) the Assignee shall have the rights a nd obligations of a Lender under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder and (ii) the Assignor shall relinquish its rights and be released from its corresponding obligations under the Loan Documents with respect to the rights and obligations assigned to the Assignee hereunder.

4.

PAYMENTS OBLIGATIONS.  On and after the Effective Date, the Assignee shall be entitled to receive from the Agent all payments of principal, interest and fees with respect to the interest assigned hereby.  The Assignee shall advance funds directly to the Agent with respect to all Loans and reimbursement payments made on or after the Effective Date with respect to the interest assigned hereby.  In consideration for the sale and assignment of Loans hereunder, the Assignee shall pay the Assignor, on the Effective Date, an amount equal to the principal amount of the portion of all Loans assigned to the Assignee hereunder which is outstanding on the Effective Date.  The Assignee will promptly remit to the Assignor (i) the portion of any principal payments assigned hereunder and received from the Agent and (ii) any

J-1

amounts of interest on Loans and fees received from the Agent to the extent either (i) or (ii) relate to the portion of the Loans assigned to the Assignee hereunder for periods prior to the Effective Date and have not been previously paid by the Assignee to the Assignor.  In the event that either party hereto receives any payment to which the other party hereto is entitled under this Assignment Agreement, then the party receiving such amount shall promptly remit it to the other party hereto.

5.

REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR’S LIABILITY.  The Assignor represents and warrants:  (a) that it is the legal and beneficial owner of the interest being assigned by it hereunder, (b) that such interest is free and clear of any adverse claim created by the Assignor, and (c) that it has all necessary right and authority to enter into this Assignment.  It is understood and agreed that the assignment and assumption hereunder is made without recourse to the Assignor and that the Assignor makes no other representation or warranty of any kind to the Assignee.  Neither the Assignor nor any of its officers, directors, employees, agents or attorneys shall be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any Loan Document, including without limitation, documents granting the Assignor and th e other Lenders a security interest in assets of the Borrower or any guarantor, (ii) any representation, warranty or statement made in or in connection with any of the Loan Documents, (iii) the financial condition or creditworthiness of the Borrower or any guarantor, (iv) the performance of or compliance with any of the terms or provisions of any of the Loan Documents, (v) inspecting any of the Property, books or records of the Borrowers, (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Loans or (vii) any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans or the Loan Documents.

6.

REPRESENTATIONS OF THE ASSIGNEE.  The Assignee (i) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements requested by the Assignee and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment Agreement, (ii) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof, together with such powers as are reasonably incidental thereto, (iv) agrees that it will perform in ac cordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender, (v) agrees that its payment instructions and notice instructions are as set forth in the attachment to Schedule 1, and (vi) confirms that none of the funds, monies, assets or other consideration being used to make the purchase and assumption hereunder are “plan assets” as defined under ERISA and that its rights, benefits and interests in and under the Loan Documents will not be “plan assets” under ERISA.

7.

INDEMNITY.  The Assignee agrees to indemnify and hold the Assignor harmless against any and all losses, costs and expenses (including, without limitation, reasonable

J-2

attorneys’ fees) and liabilities incurred by the Assignor in connection with or arising in any manner from the Assignee’s non-performance of the obligations assumed by Assignee under this Assignment Agreement on and after the Effective Date.  The Assignor agrees to indemnify and hold the Assignee harmless against any and all losses, costs and expenses (including, without limitation, reasonable attorneys’ fees) and liabilities incurred by the Assignee in connection with or arising in any manner from the Assignor’s non-performance of the obligations assigned to Assignee under this Assignment Agreement prior to the Effective Date.

8.

SUBSEQUENT ASSIGNMENTS.  After the Effective Date, the Assignee shall have the right pursuant to Section 12.3(i) of the Credit Agreement to assign the rights which are assigned to the Assignee hereunder to any entity or person, provided that (i) any such subsequent assignment does not violate any of the terms and conditions of the Loan Documents or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Loan Documents has been obtained and (ii) unless the prior written consent of the Assignor is obtained, the Assignee is not thereby released from its obligations to the Assignor hereunder, if any remain unsatisfied, including, without limitation, its obligations under Sections 4 and 7 hereof.

9.

REDUCTIONS OF AGGREGATE COMMITMENT.  If any reduction in the Revolving Commitment occurs between the date of this Assignment Agreement and the Effective Date, the percentage interest specified in Item 3 of Schedule 1 shall remain the same, but the dollar amount purchased shall be recalculated based on the reduced Revolving Commitment.

10.

ENTIRE AGREEMENT.  This Assignment Agreement and the attached Notice of Assignment embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings between the parties hereto relating to the subject matter hereof.

11.

GOVERNING LAW.  This Assignment Agreement shall be governed by the internal law, and not the law of conflicts, of the State of [Assignor’s State].

12.

NOTICES.  Notices shall be given under this Assignment Agreement in the manner set forth in the Credit Agreement.  For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the address set forth in the attachment to Schedule 1.

J-3

IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written.

ASSIGNOR:

[

]

By:

Name:

Title:

ASSIGNEE:

[

]

By:

Name:

Title:

J-4

SCHEDULE 1

to Assignment Agreement

1.

Description and Date of Credit Agreement:

2.

Date of Assignment Agreement:  

, 20__

3.

Amounts (as of date of Item 2 above):

a.

Commitment of Assignor under Credit Agreement.

$­

b.

Assignee’s Percentage of Commitment of Assignor

purchased under this Assignment Agreement.**

__________%

c.

Term Loans of Assignor outstanding under

Credit Agreement.

$

d.

Assignee’s Percentage of the Term Loans of
Assignor purchased under this Assignment
Agreement.**

__________%

4.

Amount of Assignor’s Revolving Commitment Purchased under

this Assignment Agreement.

$

5.

Amount of Assignor’s Term Loans purchased under this

Assignment Agreement.

$

6.

Proposed Effective Date:

Accepted and Agreed:

KEYBANK NATIONAL ASSOCIATION

[NAME OF ASSIGNEE]

By:

By:

Title:

Title:

**  Percentage taken to 10 decimal places.

J-5

Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT

Attach Assignor’s Administrative Information Sheet, which must

include notice address for the Assignor and the Assignee

[to be provided by KeyBank]

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EXHIBIT “I”

to Assignment Agreement

NOTICE OF ASSIGNMENT

________________, ____

To:

KeyBank National Association

Attention:

Borrower:

Inland Western Retail Real Estate Trust, Inc.

2901 Butterfield Road

Oak Brook, Illinois  60523

Attention:  Steven P. Grimes

From:

[NAME OF ASSIGNOR] (the “Assignor”)

[NAME OF ASSIGNEE] (the “Assignee”)

1.

We refer to that Amended and Restated Credit Agreement dated as of February 4, 2011 (the “Credit Agreement”) described in Item 1 of Schedule 1 attached hereto (“Schedule 1”).  Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement.

2.

This Notice of Assignment (this “Notice”) is given and delivered to the Agent pursuant to Section 12.3(ii) of the Credit Agreement.

3.

The Assignor and the Assignee have entered into an Assignment Agreement, dated as of  ,  (the “Assignment”), pursuant to which, among other things, the Assignor has sold, assigned, delegated and transferred to the Assignee, and the Assignee has purchased, accepted and assumed from the Assignor the percentage interest specified in Item 3 of Schedule 1 of all outstandings, rights and obligations under the Credit Agreement.  The Effective Date of the Assignment shall be the later of the date specified in Item 5 of Schedule 1 or two (2) Business Days (or such shorter period as agreed to by the Agent) after this Notice of Assignment and any fee required by Section 12.3(ii) of the Credit Agreement have been delivered to the Agent, provided that the Effective Date shall not occur if any condition precedent agreed to by the Assignor and the Assignee has not been satisfied.

4.

The Assignor and the Assignee hereby give to the Agent notice of the assignment and delegation referred to herein.  The Assignor will confer with the Agent before the date specified in Item 5 of Schedule 1 to determine if the Assignment Agreement will become effective on such date pursuant to Section 3 hereof, and will confer with the Agent to determine the Effective Date pursuant to Section 3 hereof if it occurs thereafter.  The Assignor

J-7

shall notify the Agent if the Assignment Agreement does not become effective on any proposed Effective Date as a result of the failure to satisfy the conditions precedent agreed to by the Assignor and the Assignee.  At the request of the Agent, the Assignor will give the Agent written confirmation of the satisfaction of the conditions precedent.

5.

If Notes are outstanding on the Effective Date, the Assignor and the Assignee request and direct that the Agent prepare and cause the Borrowers to execute and deliver new Notes or, as appropriate, replacements notes, to the Assignor and the Assignee.  The Assignor and, if applicable, the Assignee each agree to deliver to the Agent the original Note received by it from the Borrowers upon its receipt of a new Note in the appropriate amount.

6.

The Assignee advises the Agent that notice and payment instructions are set forth in the attachment to Schedule 1.

7.

The Assignee hereby represents and warrants that none of the funds, monies, assets or other consideration being used to make the purchase pursuant to the Assignment are “plan assets” as defined under ERISA and that its rights, benefits, and interests in and under the Loan Documents will not be “plan assets” under ERISA.

8.

The Assignee authorizes the Agent to act as its agent under the Loan Documents in accordance with the terms thereof.  The Assignee acknowledges that the Agent has no duty to supply information with respect to the Borrowers or the Loan Documents to the Assignee until the Assignee becomes a party to the Credit Agreement.*

*May be eliminated if Assignee is a party to the Credit Agreement prior to the Effective Date.

NAME OF ASSIGNOR

NAME OF ASSIGNEE

By:

By:

Title:

Title:

ACKNOWLEDGED AND, IF REQUIRED BY THE CREDIT AGREEMENT, CONSENTED TO BY KEYBANK, NATIONAL ASSOCIATION, AS AGENT

By:

Title:

[Attach photocopy of Schedule 1 to Assignment]

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SCHEDULE 1

List of Qualifying Collateral Pool Properties

Property Name	Owner	FEIN No.
Carrier Towne Crossing Grand Prairie, Texas	Inland Western Grand Prairie Carrier Limited Partnership, an Illinois limited partnership	20-3964607
Cost Plus World Market Distribution Center II Stockton, California	Inland Western Stockton Airport Way II, L.L.C., a Delaware limited liability company	26-0504973
Crown Theater Plaza Hartford, Connecticut	Inland Western Hartford New Park, L.L.C., a Delaware limited liability company	20-2785007
CVS Pharmacy No. 7852 Cave Creek, Arizona	Inland Western Cave Creek Tatum Boulevard, L.L.C., a Delaware limited liability company	20-3985184
Diebold Warehouse, Distribution and Service Center Building Green, Ohio	Inland Western Green Global Gateway, L.L.C., a Delaware limited liability company	20-3266085
Five Forks Blockbuster Outlot Greenville, South Carolina	Inland Western Greenville Five Forks Outlot, L.L.C., a Delaware limited liability company	20-2409857
Five Forks Shopping Center Greenville, South Carolina	Inland Western Greenville Five Forks, L.L.C., a Delaware limited liability company	20-1879070
Gerry Centennial Plaza Oswego, Illinois	Inland Western Oswego Gerry Centennial, L.L.C., a Delaware limited liability company	26-2934910
Golfsmith Altamonte Springs, Florida	Inland Western Altamonte Springs State Road, L.L.C., a Delaware limited liability company	20-3532521
Greenwich Center Phillipsburg, New Jersey	Inland Western Phillipsburg Greenwich, L.L.C., a Delaware limited liability company	20-2729764
Hartford Life Insurance Building Maple Grove, Minnesota	Inland Western Maple Grove Wedgwood, L.L.C., a Delaware limited liability company	20-1317375
Hobby Lobby Concord, North Carolina	Inland Western Concord Northlite, L.L.C., a Delaware limited liability company	20-1609557
Kohl’s Georgetown, Kentucky	Inland Western Georgetown Magnolia, L.L.C., a Delaware limited liability company	20-3470630
Manchester Meadows Shopping Center Town and Country, Missouri	Inland Western Town and Country Manchester, L.L.C., a Delaware limited liability company	20-1431000
North Ranch Pavilion Thousand Oaks, California	Inland Western Thousand Oaks, L.L.C., a Delaware limited liability company	20-0512815
Pacheco Pass Phase I Gilroy, California	Inland Western Gilroy I, L.L.C., a Delaware limited liability company	20-3256133
Page Field Commons Fort Myers, Florida	Inland Western Fort Myers Page Field, L.L.C., a Delaware limited liability company	20-2642617
PetsMart Distribution Center Ottawa, Illinois	Inland Western Ottawa Dayton, L.L.C., a Delaware limited liability company	20-2986004
Raytheon Building State College, Pennsylvania	Inland Western State College Science Park DST, a Delaware statutory trust	20-3570507
Richard Allen Scientific Building Kalamazoo, Michigan	Inland Western Kalamazoo WMU, L.L.C., a Delaware limited liability company	20-2885935
Ridge Tool Company Building Cambridge, Ohio	Inland Western Cambridge Brick Church, L.L.C., a Delaware limited liability company	20-3714218
Southlake Town Square – Office Southlake, Texas	Town Square Ventures V, L.P., a Texas limited partnership	26-3303640
Southpark Meadows Phase II Austin, Texas	Inland Western Austin Southpark Meadows II Limited Partnership, an Illinois limited partnership	20-8574543
Southwest Crossing Fort Worth, Texas	Inland Western Fort Worth Southwest Crossing Limited Partnership, an Illinois limited partnership	20-2989169
Stanley Works Building Westerville, Ohio	Inland Western Westerville Cleveland, L.L.C., a Delaware limited liability company	20-2216129
Stateline Station Kansas City, Missouri	Inland Western Kansas City Stateline, L.L.C., a Delaware limited liability company	20-2409962
The Commons at Temecula Temecula, California	Inland Western Temecula Commons, L.L.C., a Delaware limited liability company	20-2642339
The Shoppes at Stroud Township Stroudsburg, Pennsylvania	Stroud Commons, LLC, a Delaware limited liability company	26-0101120
Wal-Mart Supercenter Blytheville, Arkansas	Inland Western Blytheville, L.L.C., a Delaware limited liability company	20-1198854

SCHEDULE 2

LIST OF SUBSIDIARY GUARANTORS

Owner	FEIN No.
Inland Western Atlanta Cascade Avenue, L.L.C., a Delaware limited liability company	20-2479009
Inland Western Iowa City Alexander, L.L.C., a Delaware limited liability company	20-2094333
Inland Western Mesa Fiesta, L.L.C., a Delaware limited liability company	20-2058031
Inland Western New Britain Main, L.L.C., a Delaware limited liability company	20-0516778
Inland Western Phoenix 19th Avenue, L.L.C., a Delaware limited liability company	20-1907942
Inland Western RC-I GP, LLC, a Delaware limited liability company	27-3127247
Inland Western RC-I LP, LLC, a Delaware limited liability company	27-3127325
Inland Western San Antonio Fountainhead Drive Limited Partnership, an Illinois limited partnership	20-2496988
Inland Western Grand Prairie Carrier Limited Partnership, an Illinois limited partnership	20-3964607
Inland Western Stockton Airport Way II, L.L.C., a Delaware limited liability company	26-0504973
Inland Western Hartford New Park, L.L.C., a Delaware limited liability company	20-2785007
Inland Western Cave Creek Tatum Boulevard, L.L.C., a Delaware limited liability company	20-3985184
Inland Western Green Global Gateway, L.L.C., a Delaware limited liability company	20-3266085
Inland Western Greenville Five Forks Outlot, L.L.C., a Delaware limited liability company	20-2409857
Inland Western Greenville Five Forks, L.L.C., a Delaware limited liability company	20-1879070
Inland Western Oswego Gerry Centennial, L.L.C., a Delaware limited liability company	26-2934910
Inland Western Altamonte Springs State Road, L.L.C., a Delaware limited liability company	20-3532521
Inland Western Phillipsburg Greenwich, L.L.C., a Delaware limited liability company	20-2729764
Inland Western Maple Grove Wedgwood, L.L.C., a Delaware limited liability company	20-1317375
Inland Western Concord Northlite, L.L.C., a Delaware limited liability company	20-1609557
Inland Western Georgetown Magnolia, L.L.C., a Delaware limited liability company	20-3470630
Inland Western Town and Country Manchester, L.L.C., a Delaware limited liability company	20-1431000
Inland Western Thousand Oaks, L.L.C., a Delaware limited liability company	20-0512815
Inland Western Gilroy I, L.L.C., a Delaware limited liability company	20-3256133
Inland Western Fort Myers Page Field, L.L.C., a Delaware limited liability company	20-2642617
Inland Western Ottawa Dayton, L.L.C., a Delaware limited liability company	20-2986004
Inland Western State College Science Park DST, a Delaware statutory trust	20-3570507
Inland Western Kalamazoo WMU, L.L.C., a Delaware limited liability company	20-2885935
Inland Western Cambridge Brick Church, L.L.C., a Delaware limited liability company	20-3714218
Town Square Ventures V, L.P., a Texas limited partnership	26-3303640
Inland Western Austin Southpark Meadows II Limited Partnership, an Illinois limited partnership	20-8574543
Inland Western Fort Worth Southwest Crossing Limited Partnership, an Illinois limited partnership	20-2989169
Inland Western Westerville Cleveland, L.L.C., a Delaware limited liability company	20-2216129
Inland Western Kansas City Stateline, L.L.C., a Delaware limited liability company	20-2409962
Inland Western Temecula Commons, L.L.C., a Delaware limited liability company	20-2642339
Stroud Commons, LLC, a Delaware limited liability company	26-0101120
Inland Western Blytheville, L.L.C., a Delaware limited liability company	20-1198854

SCHEDULE 3

EXISTING FACILITY LETTERS OF CREDIT

None

SCHEDULE 4

PROSPECTIVE QUALIFYING COLLATERAL POOL PROPERTIES WHICH ARE SINGLE TENANT PROPERTIES

Traveler’s Building, Knoxville, Tennessee

Traveler’s Building Adjacent Parking Lot, Knoxville, Tennessee

Endnotes

(Illinois)

EX-21.1

Exhibit 21.1

INLAND WESTERN RETAIL REAL ESTATE TRUST, INC.

Subsidiary List

As of December 31, 2010

Entity	Formation
4 Overlook LLC	Delaware
Bel Air Square LLC	Delaware
Bellevue Development, LLC	Delaware
C&S Southlake Capital Partners I, L.P.	Delaware
Capital Centre LLC	Maryland
Capital Centre Holding LLC	Delaware
Capital Centre Funding LLC	Maryland
Centre at Laurel, LLC	Maryland
Colesville One, LLC	Maryland
Gateway Village LLC	Maryland
Gateway Village Holding LLC	Delaware
Green Valley Crossing, L.L.C.	Delaware
Half Day LLC	Delaware
Inland Bel Air SPE, L.L.C.	Delaware
Inland Capital HC, L.L.C.	Delaware
Inland Continental Rave Houston, L.L.C.	Delaware
Inland Continental Polaris, L.L.C.	Delaware
Inland Gateway HC, L.L.C.	Delaware
Inland Gateway SPE, L.L.C.	Delaware
Inland Holdco Management LLC	Delaware
Inland Mondo Powell, L.L.C.	Delaware
Inland Northwest Management Corp.	Delaware
Inland Pacific Property Services LLC	Delaware
Inland Park Place Limited Partnership	Illinois
Inland Plano Acquisitions, LLC	Delaware
Inland Plano Investments, LLC	Delaware
Inland Polaris Member, L.L.C.	Delaware
Inland Powell Member, L.L.C.	Delaware
Inland Rave Member, L.L.C.	Delaware
Inland Reisterstown HC, L.L.C.	Delaware
Inland Reisterstown SPE I, L.L.C.	Delaware
Inland Reisterstown SPE II, L.L.C.	Delaware
Inland Southeast Darien, L.L.C.	Delaware
Inland Southeast King’s Grant, L.L.C.	Delaware
Inland Southeast New Britain, L.L.C.	Delaware
Inland Southeast Newnan Crossing, L.L.C.	Delaware
Inland Southeast Stony Creek, L.L.C.	Delaware
Inland Southwest Management Corp.	Delaware
Inland Southwest Management LLC	Delaware
Inland Towson SPE, L.L.C.	Delaware
Inland US Management LLC	Delaware
Inland Western 4 Overlook, L.L.C.	Delaware
Inland Western Acquisitions, Inc.	Illinois
Inland Western Acworth Stilesboro, L.L.C.	Delaware
Inland Western Allen McDermott GP, L.L.C.	Delaware
Inland Western Allen McDermott Limited Partnership	Illinois
Inland Western Allen McDermott LP, L.L.C.	Delaware
Inland Western Altamonte Springs State Road, L.L.C.	Delaware
Inland Western Arvada, L.L.C.	Delaware
Inland Western Atlanta Cascade Avenue, L.L.C.	Delaware
Inland Western Austin Mopac GP, L.L.C.	Delaware
Inland Western Austin Mopac Limited Partnership	Illinois
Inland Western Austin Mopac LP, L.L.C.	Delaware
Inland Western Austin Southpark Meadows GP, L.L.C.	Delaware
Inland Western Austin Southpark Meadows Limited Partnership	Illinois
Inland Western Austin Southpark Meadows LP, L.L.C.	Delaware
Inland Western Austin Southpark Meadows Pad G GP, L.L.C.	Delaware
Inland Western Austin Southpark Meadows Pad G Limited Partnership	Illinois
Inland Western Austin Southpark Meadows II Limited Partnership	Illinois
Inland Western Austin Southpark Meadows II GP, L.L.C.	Delaware
Inland Western Austin Southpark Meadows II LP, L.L.C.	Delaware
Inland Western Avondale McDowell, L.L.C.	Delaware
Inland Western Bakersfield Calloway, L.L.C.	Delaware
Inland Western Bangor Broadway, L.L.C.	Delaware
Inland Western Bangor Parkade, L.L.C.	Delaware
Inland Western Baton Rouge, L.L.C.	Delaware
Inland Western Bay Shore Gardiner, L.L.C.	Delaware
Inland Western Beekman, L.L.C.	Delaware
Inland Western Beekman Member, L.L.C.	Delaware
Inland Western Beekman Member II, L.L.C.	Delaware
Inland Western Bethlehem Saucon Valley DST	Delaware
Inland Western Bethlehem Saucon Valley Beneficiary, L.L.C.	Delaware
Inland Western Bettendorf Duck Creek, L.L.C.	Delaware
Inland Western Bettendorf Duck Creek I, L.L.C.	Delaware
Inland Western Birmingham Edgemont, L.L.C.	Delaware
Inland Western Bluffton Low Country, L.L.C.	Delaware
Inland Western Bluffton Low Country II, L.L.C.	Delaware
Inland Western Blytheville, L.L.C.	Delaware
Inland Western Bradenton Beachway, L.L.C.	Delaware
Inland Western Brooklyn Park 93rd Avenue, L.L.C.	Delaware
Inland Western Burleson South Towne GP, L.L.C.	Delaware
Inland Western Burleson South Towne Limited Partnership	Illinois
Inland Western Burleson South Towne LP, L.L.C.	Delaware
Inland Western Burleson Wilshire GP, L.L.C.	Delaware
Inland Western Burleson Wilshire Limited Partnership	Illinois
Inland Western Burleson Wilshire LP, L.L.C.	Delaware
Inland Western Butler Kinnelon, L.L.C.	Delaware
Inland Western Cambridge Brick Church, L.L.C.	Delaware
Inland Western Canton O Green, L.L.C.	Delaware
Inland Western Canton Paradise, L.L.C.	Delaware
Inland Western Canton Paradise Outlot, L.L.C.	Delaware
Inland Western Cave Creek Tatum Boulevard, L.L.C.	Delaware
Inland Western Cedar Hill Pleasant Run GP, L.L.C.	Delaware
Inland Western Cedar Hill Pleasant Run Limited Partnership	Illinois
Inland Western Chantilly Crossing, L.L.C.	Delaware
Inland Western Charleston North Rivers, L.L.C.	Delaware
Inland Western Chattanooga Brainerd Road, L.L.C.	Delaware
Inland Western Chicago Ashland, L.L.C.	Delaware
Inland Western Chicago Ashland I, L.L.C.	Delaware
Inland Western Chicago Brickyard, L.L.C.	Delaware
Inland Western Clear Lake Clear Shores GP, L.L.C.	Delaware
Inland Western Clear Lake Clear Shores Limited Partnership	Illinois
Inland Western Clear Lake Clear Shores LP, L.L.C.	Delaware
Inland Western Cocoa Beach Cornerstone, L.L.C.	Delaware
Inland Western Colesville New  Hampshire SPE, L.L.C.	Delaware
Inland Western College Station Gateway GP, L.L.C.	Delaware
Inland Western College Station Gateway Limited Partnership	Illinois
Inland Western College Station Gateway LP, L.L.C.	Delaware
Inland Western College Station Gateway II GP, L.L.C.	Delaware
Inland Western College Station Gateway II Limited Partnership	Illinois
Inland Western College Station Gateway II LP, L.L.C.	Delaware
Inland Western Columbia Broad River, L.L.C.	Delaware
Inland Western Columbus Clifty, L.L.C.	Delaware
Inland Western Columbus Polaris, L.L.C.	Delaware
Inland Western Columbus Sawmill, L.L.C.	Delaware
Inland Western Coppell Town GP, L.L.C.	Delaware
Inland Western Coppell Town Limited Partnership	Illinois
Inland Western Concord King’s Grant II, L.L.C.	Delaware
Inland Western Concord Northlite, L.L.C.	Delaware
Inland Western Coram Plaza, L.L.C.	Delaware
Inland Western Covington Newton Crossroads, L.L.C.	Delaware
Inland Western Cranberry Beneficiary, L.L.C.	Delaware
Inland Western Cranberry DST	Delaware
Inland Western Crossville Main, L.L.C.	Delaware
Inland Western Cumming Green’s Corner, L.L.C.	Delaware
Inland Western Cupertino Tantau, L.L.C.	Delaware
Inland Western Cuyahoga Falls, L.L.C.	Delaware
Inland Western Cypress Mill GP, L.L.C.	Delaware
Inland Western Cypress Mill Limited Partnership	Illinois
Inland Western Dallas Lincoln Park GP, L.L.C.	Delaware
Inland Western Dallas Lincoln Park Limited Partnership	Illinois
Inland Western Dallas Lincoln Park LP, L.L.C.	Delaware
Inland Western Dallas Paradise, L.L.C.	Delaware
Inland Western Dallas Preston Trail GP, L.L.C.	Delaware
Inland Western Dallas Preston Trail Limited Partnership	Texas
Inland Western Dallas Preston Trail LP, L.L.C.	Delaware
Inland Western Dallas Preston Trail Pad GP, L.L.C.	Delaware
Inland Western Dallas Preston Trail Pad Limited Partnership	Texas
Inland Western Danforth, L.L.C.	Delaware
Inland Western Denton Crossing GP, L.L.C.	Delaware
Inland Western Denton Crossing Limited Partnership	Illinois
Inland Western Depere, L.L.C.	Delaware
Inland Western Douglasville Douglas, L.L.C.	Delaware
Inland Western Duluth John’s Creek, L.L.C.	Delaware
Inland Western Duluth John’s Creek SPE, L.L.C.	Delaware
Inland Western Duncansville Holliday Beneficiary, L.L.C.	Delaware
Inland Western Duncansville Holliday DST	Delaware
Inland Western Easton Forks Town DST	Delaware
Inland Western El Paso MDS Limited Partnership	Illinois
Inland Western El Paso MDS LP, L.L.C.	Delaware
Inland Western El Paso Rojas GP, L.L.C.	Delaware
Inland Western El Paso Rojas Limited Partnership	Illinois
Inland Western El Paso Rojas LP, L.L.C.	Delaware
Inland Western Euless GP, L.L.C.	Delaware
Inland Western Euless Limited Partnership	Illinois
Inland Western Euless LP, L.L.C.	Delaware
Inland Western Evans, L.L.C.	Delaware
Inland Western Fort Mill West Town, L.L.C.	Delaware
Inland Western Fort Myers Page Field, L.L.C.	Delaware
Inland Western Fort Worth Southwest Crossing GP, L.L.C.	Delaware
Inland Western Fort Worth Southwest Crossing Limited Partnership	Illinois
Inland Western Fort Worth Southwest Crossing LP, L.L.C.	Delaware
Inland Western Fountain Hills Four Peaks, L.L.C.	Delaware
Inland Western Fresno Blackstone Avenue, L.L.C.	Delaware
Inland Western Frisco Parkway GP, L.L.C.	Delaware
Inland Western Frisco Parkway LP, L.L.C.	Delaware
Inland Western Fullerton Metrocenter, L.L.C.	Delaware
Inland Western Gainesville Village, L.L.C.	Delaware
Inland Western Galveston Galvez GP, L.L.C.	Delaware
Inland Western Galveston Galvez Limited Partnership	Illinois
Inland Western Galveston Galvez LP, L.L.C.	Delaware
Inland Western Georgetown Magnolia, L.L.C.	Delaware
Inland Western Georgetown Rivery GP, L.L.C.	Delaware
Inland Western Georgetown Rivery Limited Partnership	Illinois
Inland Western Georgetown Rivery LP, L.L.C.	Delaware
Inland Western Gilroy I, L.L.C.	Delaware
Inland Western Gilroy II, L.L.C.	Delaware
Inland Western Glendale, L.L.C.	Delaware
Inland Western Glendale Outlot D, L.L.C.	Delaware
Inland Western Glendale Peoria II, L.L.C.	Delaware
Inland Western Gloucester Cross Keys, L.L.C.	Delaware
Inland Western Grand Prairie Carrier GP, L.L.C.	Delaware
Inland Western Grand Prairie Carrier Limited Partnership	Illinois
Inland Western Grand Prairie Carrier LP, L.L.C.	Delaware
Inland Western Grand Prairie Southwest Crossing GP, L.L.C.	Delaware
Inland Western Grand Prairie Southwest Crossing Limited Partnership	Illinois
Inland Western Grapevine GP, L.L.C.	Delaware
Inland Western Grapevine Limited Partnership	Illinois
Inland Western Grapevine LP, L.L.C.	Delaware
Inland Western Green Global Gateway, L.L.C.	Delaware
Inland Western Greensboro Airport Center, L.L.C.	Delaware
Inland Western Greensburg Commons, L.L.C.	Delaware
Inland Western Greenville Five Forks, L.L.C.	Delaware
Inland Western Greenville Five Forks Outlot, L.L.C.	Delaware
Inland Western Greer Wade Hampton, L.L.C.	Delaware
Inland Western Gurnee, L.L.C.	Delaware
Inland Western Half Day, L.L.C.	Delaware
Inland Western Hartford New Park, L.L.C.	Delaware
Inland Western Hartford New Park Member, L.L.C.	Delaware
Inland Western Hartford New Park Member II, L.L.C.	Delaware
Inland Western Heath Southgate, L.L.C.	Delaware
Inland Western Hellertown Main Street DST	Delaware
Inland Western Hickory-Catawba, L.L.C.	Delaware
Inland Western High Ridge, L.L.C.	Delaware
Inland Western Hinsdale Ogden, L.L.C.	Delaware
Inland Western Houma Academy, L.L.C.	Delaware
Inland Western Houma Magnolia, L.L.C.	Delaware
Inland Western Houston Bear Creek GP, L.L.C.	Delaware
Inland Western Houston Bear Creek Limited Partnership	Illinois
Inland Western Houston Bear Creek LP, L.L.C.	Delaware
Inland Western Houston Little York GP, L.L.C.	Delaware
Inland Western Houston Little York Limited Partnership	Illinois
Inland Western Houston New Forest GP, L.L.C.	Delaware
Inland Western Houston New Forest Limited Partnership	Illinois
Inland Western Houston Royal Oaks Village II GP, L.L.C.	Delaware
Inland Western Houston Royal Oaks Village II Limited Partnership	Illinois
Inland Western Houston Royal Oaks Village II LP, L.L.C.	Delaware
Inland Western Humble Humblewood GP, L.L.C.	Delaware
Inland Western Humble Humblewood Limited Partnership	Illinois
Inland Western Humble Humblewood LP, L.L.C.	Delaware
Inland Western Iowa City Alexander, L.L.C.	Delaware
Inland Western Irmo Station, L.L.C.	Delaware
Inland Western Irving GP, L.L.C.	Delaware
Inland Western Irving Limited Partnership	Illinois
Inland Western Irving LP, L.L.C.	Delaware
Inland Western Jackson Columns, L.L.C.	Delaware
Inland Western Jacksonville Race Track Road, L.L.C.	Delaware
Inland Western Jacksonville Southpoint, L.L.C.	Delaware
Inland Western Jonesboro Parker, L.L.C.	Delaware
Inland Western JV Beaumont Crossings, L.L.C.	Delaware
Inland Western JV Hampton Retail Colorado, L.L.C.	Delaware
Inland Western JV Henderson Green Valley, L.L.C.	Delaware
Inland Western JV Henderson Lake Mead, L.L.C.	Delaware
Inland Western JV Nashville Bellevue, L.L.C.	Delaware
Inland Western JV South Billings Associates, L.L.C.	Delaware
Inland Western Kalamazoo WMU, L.L.C.	Delaware
Inland Western Kalispell Mountain View, L.L.C.	Delaware
Inland Western Kalispell Mountain View II, L.L.C.	Delaware
Inland Western Kansas City, L.L.C.	Delaware
Inland Western Kansas City Stateline, L.L.C.	Delaware
Inland Western Kansas City Wilshire, L.L.C.	Delaware
Inland Western Kill Devil Hills Croatan, L.L.C.	Delaware
Inland Western Kingsport East Stone, L.L.C.	Delaware
Inland Western Knoxville Corridor Park, L.L.C.	Delaware
Inland Western Knoxville Corridor Park II, L.L.C.	Delaware
Inland Western Knoxville Harvest, L.L.C.	Delaware
Inland Western Lake Mary, L.L.C.	Delaware
Inland Western Lake Worth Towne Crossing GP, L.L.C.	Delaware
Inland Western Lake Worth Towne Crossing Limited Partnership	Illinois
Inland Western Lake Worth Towne Crossing LP, L.L.C.	Delaware
Inland Western Lakewood, L.L.C.	Delaware
Inland Western Lansing Eastwood, L.L.C.	Delaware
Inland Western Lansing Eastwood SPE, L.L.C.	Delaware
Inland Western Larkspur, L.L.C.	Delaware
Inland Western Las Vegas, L.L.C.	Delaware
Inland Western Las Vegas Montecito, L.L.C.	Delaware
Inland Western Las Vegas Montecito Outlot, L.L.C.	Delaware
Inland Western Laurel Contee, L.L.C.	Delaware
Inland Western Laurel Contee Acquisitions, L.L.C.	Delaware
Inland Western Lawrence, L.L.C.	Delaware
Inland Western Lawrenceville Simonton, L.L.C.	Delaware
Inland Western Lawton Lee Blvd., L.L.C.	Delaware
Inland Western Lebanon 9th Street DST	Delaware
Inland Western Lewis Center Powell, L.L.C.	Delaware
Inland Western Lewisville Lakepointe GP, L.L.C.	Delaware
Inland Western Lewisville Lakepointe Limited Partnership	Illinois
Inland Western Lewisville Lakepointe LP, L.L.C.	Delaware
Inland Western Longmont Fox Creek, L.L.C.	Delaware
Inland Western Management Corp.	Delaware
Inland Western Mansfield GP, L.L.C.	Delaware
Inland Western Mansfield Limited Partnership	Illinois
Inland Western Mansfield LP, L.L.C.	Delaware
Inland Western Maple Grove Wedgwood, L.L.C.	Delaware
Inland Western Marysville, L.L.C.	Delaware
Inland Western Massillon Village, L.L.C.	Delaware
Inland Western McAllen GP, L.L.C.	Delaware
Inland Western McAllen Limited Partnership	Illinois
Inland Western McAllen LP, L.L.C.	Delaware
Inland Western McAllen MDS Limited Partnership	Illinois
Inland Western McAllen MDS LP, L.L.C.	Delaware
Inland Western McAllen Trenton GP, L.L.C.	Delaware
Inland Western McAllen Trenton Limited Partnership	Illinois
Inland Western McDonough Henry Town, L.L.C.	Delaware
Inland Western McKinney Lake Forest GP, L.L.C.	Delaware
Inland Western McKinney Lake Forest Limited Partnership	Illinois
Inland Western McKinney Lake Forest LP, L.L.C.	Delaware
Inland Western McKinney Stonebridge GP, L.L.C.	Delaware
Inland Western McKinney Stonebridge Limited Partnership	Illinois
Inland Western McKinney Stonebridge LP, L.L.C.	Delaware
Inland Western MDS Portfolio, L.L.C.	Delaware
Inland Western Memphis Winchester, L.L.C.	Delaware
Inland Western Mesa Fiesta, L.L.C.	Delaware
Inland Western Miami 19th Street, L.L.C.	Delaware
Inland Western Middletown Brown’s Lane, L.L.C.	Delaware
Inland Western Middletown Fairgrounds Plaza, L.L.C.	Delaware
Inland Western Midland Academy GP, L.L.C.	Delaware
Inland Western Midland Academy Limited Partnership	Illinois
Inland Western Midland Academy LP, L.L.C.	Delaware
Inland Western Milwaukee Midtown, L.L.C.	Delaware
Inland Western Milwaukee Midtown II, L.L.C.	Delaware
Inland Western Montevallo Main, L.L.C.	Delaware
Inland Western Moore 19th Street, L.L.C.	Delaware
Inland Western Morristown Crockett, L.L.C.	Delaware
Inland Western Mountain Brook, L.L.C.	Delaware
Inland Western Mt. Pleasant Park West, L.L.C.	Delaware
Inland Western Murrieta Avenida Acacias, L.L.C.	Delaware
Inland Western Naperville Route 59, L.L.C.	Delaware
Inland Western New Britain Main, L.L.C.	Delaware
Inland Western New Hartford Orchard, L.L.C.	Delaware
Inland Western Newport News Jefferson, L.L.C.	Delaware
Inland Western New Port Richey Mitchell, L.L.C.	Delaware
Inland Western New York Portfolio, L.L.C.	Delaware
Inland Western Newburgh Crossing, L.L.C.	Delaware
Inland Western Newnan Crossing II, L.L.C.	Delaware
Inland Western Norman, L.L.C.	Delaware
Inland Western North Attleboro Crossroads, L.L.C.	Delaware
Inland Western North Carolina Sales, Inc.	Illinois
Inland Western North Richland Hills Davis GP, L.L.C.	Delaware
Inland Western North Richland Hills Davis Limited Partnership	Illinois
Inland Western North Richland Hills Davis LP, L.L.C.	Delaware
Inland Western Northport Northwood, L.L.C.	Delaware
Inland Western Northwoods Natural Bridge, L.L.C.	Delaware
Inland Western Oklahoma City Quail, L.L.C.	Delaware
Inland Western Oklahoma City Western Avenue, L.L.C.	Delaware
Inland Western Ontario 4th Street, L.L.C.	Delaware
Inland Western Orange 440 Boston, L.L.C.	Delaware
Inland Western Orange 440 Boston Member, L.L.C.	Delaware
Inland Western Orange 440 Boston Member II, L.L.C.	Delaware
Inland Western Orange 53 Boston, L.L.C.	Delaware
Inland Western Oswego Douglass, L.L.C.	Delaware
Inland Western Oswego Gerry Centennial, L.L.C.	Delaware
Inland Western Ottawa Dayton, L.L.C.	Delaware
Inland Western Panama City, L.L.C.	Delaware
Inland Western Pawtucket Boulevard, L.L.C.	Delaware
Inland Western Pawtucket Cottage, L.L.C.	Delaware
Inland Western Phenix City, L.L.C.	Delaware
Inland Western Phillipsburg Greenwich, L.L.C.	Delaware
Inland Western Phillipsburg Greenwich Member, L.L.C.	Delaware
Inland Western Phillipsburg Greenwich Member II, L.L.C.	Delaware
Inland Western Phoenix, L.L.C.	Delaware
Inland Western Phoenix 19th Avenue, L.L.C.	Delaware
Inland Western Pittsburgh William Penn GP, L.L.C.	Delaware
Inland Western Pittsburgh William Penn, L.P.	Illinois
Inland Western Pittsburgh William Penn Member II DST	Delaware
Inland Western Pittsburgh William Penn Partner, L.P.	Delaware
Inland Western Placentia, L.L.C.	Delaware
Inland Western Plantation Express, L.L.C.	Delaware
Inland Western Plymouth 5, L.L.C.	Delaware
Inland Western Port Arthur Academy GP, L.L.C.	Delaware
Inland Western Port Arthur Academy Limited Partnership	Illinois
Inland Western Port Arthur Academy LP, L.L.C.	Delaware
Inland Western Pottstown GP, L.L.C.	Delaware
Inland Western Pottstown Limited Partnership	Illinois
Inland Western Pottstown LP DST	Delaware
Inland Western Poughkeepsie Mid-Hudson, L.L.C.	Delaware
Inland Western Poughkeepsie Mid-Hudson Member, L.L.C.	Delaware
Inland Western Poughkeepsie Mid-Hudson Member II, L.L.C.	Delaware
Inland Western Powder Springs Battle Ridge, L.L.C.	Delaware
Inland Western Punxsutawney Mahoning Street DST	Delaware
Inland Western Quakertown GP, L.L.C.	Delaware
Inland Western Quakertown Limited Partnership	Illinois
Inland Western Quakertown LP DST	Delaware
Inland Western RC-I GP, LLC	Delaware
Inland Western RC-I LP, LLC	Delaware
Inland Western Retail Real Estate Advisory Services, Inc.	Illinois
Inland Western Richmond Mayland, L.L.C.	Delaware
Inland Western Round Rock Forest Commons GP, L.L.C.	Delaware
Inland Western Round Rock Forest Commons Limited Partnership	Illinois
Inland Western Round Rock Forest Commons LP, L.L.C.	Delaware
Inland Western Royal Palm Beach Commons, L.L.C.	Delaware
Inland Western Saginaw GP, L.L.C.	Delaware
Inland Western Saginaw Limited Partnership	Illinois
Inland Western Saginaw LP, L.L.C.	Delaware
Inland Western Salt Lake City Gateway, L.L.C.	Delaware
Inland Western Salt Lake City Gateway II, L.L.C.	Delaware
Inland Western San Antonio GP, L.L.C.	Delaware
Inland Western San Antonio Limited Partnership	Illinois
Inland Western San Antonio LP, L.L.C.	Delaware
Inland Western San Antonio Academy GP, L.L.C.	Delaware
Inland Western San Antonio Academy Limited Partnership	Illinois
Inland Western San Antonio Academy LP, L.L.C.	Delaware
Inland Western San Antonio Fountainhead Drive GP, L.L.C.	Delaware
Inland Western San Antonio Fountainhead Drive Limited Partnership	Illinois
Inland Western San Antonio Fountainhead Drive LP, L.L.C.	Delaware
Inland Western San Antonio HQ GP, L.L.C.	Delaware
Inland Western San Antonio HQ Limited Partnership	Illinois
Inland Western San Antonio HQ LP, L.L.C.	Delaware
Inland Western San Antonio Huebner Oaks GP, L.L.C.	Delaware
Inland Western San Antonio Huebner Oaks Limited Partnership	Illinois
Inland Western San Antonio Huebner Oaks LP, L.L.C.	Delaware
Inland Western San Antonio Military Drive GP, L.L.C.	Delaware
Inland Western San Antonio Military Drive Limited Partnership	Illinois
Inland Western San Antonio Military Drive LP, L.L.C.	Delaware
Inland Western San Antonio Mission GP, L.L.C.	Delaware
Inland Western San Antonio Mission Limited Partnership	Illinois
Inland Western San Antonio Mission LP, L.L.C.	Delaware
Inland Western San Antonio Rogers GP, L.L.C.	Delaware
Inland Western San Antonio Rogers Limited Partnership	Illinois
Inland Western San Antonio Rogers LP, L.L.C.	Delaware
Inland Western Santa Clara 1350 Duane, L.L.C.	Delaware
Inland Western Santa Fe, L.L.C.	Delaware
Inland Western Saratoga Springs Wilton, L.L.C.	Delaware
Inland Western Saratoga Springs Wilton Member, L.L.C.	Delaware
Inland Western Saratoga Springs Wilton Member II, L.L.C.	Delaware
Inland Western Schaumburg American Lane, L.L.C.	Delaware
Inland Western Seattle Northgate North, L.L.C.	Delaware
Inland Western Seekonk Power Center, L.L.C.	Delaware
Inland Western Severn, L.L.C.	Delaware
Inland Western Severn NB, L.L.C.	Delaware
Inland Western Southlake GP, L.L.C.	Delaware
Inland Western Southlake Limited Partnership	Illinois
Inland Western Southlake LP, L.L.C.	Delaware
Inland Western Southlake Corners GP, L.L.C.	Delaware
Inland Western Southlake Corners Limited Partnership	Illinois
Inland Western Southlake Corners LP, L.L.C.	Delaware
Inland Western Southlake Suntree GP, L.L.C.	Delaware
Inland Western Southlake Suntree Limited Partnership	Illinois
Inland Western Spartanburg, L.L.C.	Delaware
Inland Western Spartanburg SPE, L.L.C.	Delaware
Inland Western SPE, L.L.C.	Delaware
Inland Western Spokane Northpointe, L.L.C.	Delaware
Inland Western Springfield Boston, L.L.C.	Delaware
Inland Western St. George, L.L.C.	Delaware
Inland Western State College Science Park DST	Delaware
Inland Western Stockton Airport Way, L.L.C.	Delaware
Inland Western Stockton Airport Way II, L.L.C.	Delaware
Inland Western Stony Creek II, L.L.C.	Delaware
Inland Western Sugar Land Colony GP, L.L.C.	Delaware
Inland Western Sugar Land Colony Limited Partnership	Illinois
Inland Western Sugar Land Colony LP, L.L.C.	Delaware
Inland Western Sugar Land Riverpark I GP, L.L.C.	Delaware
Inland Western Sugar Land Riverpark I Limited Partnership	Illinois
Inland Western Sugar Land Riverpark I LP, L.L.C.	Delaware
Inland Western Sugar Land Riverpark IIA GP, L.L.C.	Delaware
Inland Western Sugar Land Riverpark IIA Limited Partnership	Illinois
Inland Western Sugar Land Riverpark IIA LP, L.L.C.	Delaware
Inland Western Sugar Land Riverpark IIB GP, L.L.C.	Delaware
Inland Western Sugar Land Riverpark IIB Limited Partnership	Illinois
Inland Western Sugar Land Riverpark IIB LP, L.L.C.	Delaware
Inland Western Summerville Azalea Square, L.L.C.	Delaware
Inland Western Summerville Azalea Square III GP, L.L.C.	Delaware
Inland Western Summerville Azalea Square III Limited Partnership	Tennessee
Inland Western Summerville Azalea Square III LP, L.L.C.	Delaware
Inland Western Sylacauga Broadway, L.L.C.	Delaware
Inland Western Tallahassee Governor’s One, L.L.C.	Delaware
Inland Western Tampa Walters, L.L.C.	Delaware
Inland Western Taylorsville 2700 West, L.L.C.	Delaware
Inland Western Temecula Commons, L.L.C.	Delaware
Inland Western Temecula Vail, L.L.C.	Delaware
Inland Western Thousand Oaks, L.L.C.	Delaware
Inland Western Town And Country Manchester, L.L.C.	Delaware
Inland Western Traverse City Bison Hollow, L.L.C.	Delaware
Inland Western Tuscaloosa University, L.L.C.	Delaware
Inland Western University Heights University Square, L.L.C.	Delaware
Inland Western Viera Lake Andrew, L.L.C.	Delaware
Inland Western Waco Central GP, L.L.C.	Delaware
Inland Western Waco Central Limited Partnership	Illinois
Inland Western Waco Central LP, L.L.C.	Delaware
Inland Western Warner Robins Paradise, L.L.C.	Delaware
Inland Western Watauga GP, L.L.C.	Delaware
Inland Western Watauga Limited Partnership	Illinois
Inland Western Watauga LP, L.L.C.	Delaware
Inland Western/Weber JV Dallas Wheatland GP, L.L.C.	Delaware
Inland Western/Weber JV Dallas Wheatland Limited Partnership	Texas
Inland Western/Weber JV Dallas Wheatland LP, L.L.C.	Delaware
Inland Western/Weber JV Frisco Parkway Limited Partnership	Texas
Inland Western Wesley Chapel Northwoods, L.L.C.	Delaware
Inland Western West Allis Greenfield, L.L.C.	Delaware
Inland Western West Mifflin Century III GP, L.L.C.	Delaware
Inland Western West Mifflin Century III, L.P.	Illinois
Inland Western West Mifflin Century III Member II DST	Delaware
Inland Western West Mifflin Century III Partner, L.P.	Delaware
Inland Western Westbury Merchants Plaza, L.L.C.	Delaware
Inland Western Westerville Cleveland, L.L.C.	Delaware
Inland Western Williston Maple Tree, L.L.C.	Delaware
Inland Western Wilmington College, L.L.C.	Delaware
Inland Western Winston-Salem 5th Street, L.L.C.	Delaware
Inland Western Winter Springs Red Bug, L.L.C.	Delaware
Inland Western Woodridge Seven Bridges, L.L.C.	Delaware
Inland Western Worcester Lincoln Plaza, L.L.C.	Delaware
IW JV 2009, LLC	Delaware
IW Mezz 2009, LLC	Delaware
IW Mezz 2 2009, LLC	Delaware
IWR Protective Corporation	Delaware
IWR Gateway Central Plant, L.L.C.	Delaware
Lake Mead Crossing, LLC	Nevada
MS Inland Fund, LLC	Delaware
RC Inland L.P.	Delaware
RC Inland REIT LP	Maryland
Reisterstown Plaza Associates, LLC	Maryland
Reisterstown Plaza Holdings, LLC	Maryland
RI Subsidiary GP LLC	Delaware
RRP Hecht, LLC	Maryland
SLTS Grand Avenue II, L.P.	Texas
SLTS Grand Avenue II GP, L.L.C.	Delaware
Stroud Commons, LLC	Delaware
The Shops At Legacy (Inland) GP, L.L.C.	Delaware
The Shops At Legacy (Inland) L.P.	Illinois
The Shops At Legacy (Inland) Mezz, L.L.C.	Delaware
Town Square Ventures, L.P.	Illinois
Town Square Ventures II GP, L.L.C.	Texas
Town Square Ventures II, L.P.	Texas
Town Square Ventures III, L.P.	Texas
Town Square Ventures III GP, L.L.C.	Delaware
Town Square Ventures III LP, L.L.C.	Delaware
Town Square Ventures IV GP, L.L.C.	Delaware
Town Square Ventures IV, L.P.	Texas
Town Square Ventures IV LP, L.L.C.	Delaware
Town Square Ventures V GP, L.L.C.	Delaware
Town Square Ventures V, L.P.	Texas
Town Square Ventures V LP, L.L.C.	Delaware
Towson Circle LLC	Maryland
University Square Parking LLC	Delaware
Western Town Square Ventures GP, L.L.C.	Delaware
Western Town Square Ventures LP, L.L.C.	Delaware
Western Town Square Ventures I GP, L.L.C.	Delaware

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No. 333-151007 on Form S-3 and Registration Statement No. 333-166630 on Form S-8 of our reports dated February 23, 2011, relating to the consolidated financial statements and financial statement schedules of Inland Western Retail Real Estate Trust, Inc., and subsidiaries, (the “Company”) (which reports express an unqualified opinion and includes an explanatory paragraph relating to the change in method of accounting for noncontrolling interests), and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Inland Western Retail Real Estate Trust, Inc. for the year ended December 3 1, 2010.

/s/ Deloitte & Touche LLP

Chicago, Illinois

February 23, 2011

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Inland Western Retail Real Estate Trust, Inc:

We consent to the incorporation by reference in the registration statements on Form S-3 (No. 333-151007) and Form S-8 (No. 333-166630) of Inland Western Retail Real Estate Trust, Inc. of our report dated March 31, 2009, except for notes 1, 2, 3, 12, 13, and 14, which are as of February 23, 2011, with respect to the  consolidated statements of operations and other comprehensive loss, equity, and cash flows for the year ended December 31, 2008, and the 2008 information in the related financial statement schedules, which report appears in the December 31, 2010 Annual Report on Form 10-K of Inland Western Retail Real Estate Trust, Inc.

Our report with respect to the consolidated financial statements makes reference to the Company retrospectively applying certain reclassifications associated with discontinued operations and upon the adoption of an accounting standard related to noncontrolling interests.

/s/ KPMG LLP

Chicago, Illinois

February 23, 2011

EX-31.1

Exhibit 31.1

CERTIFICATION

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Steven P. Grimes, certify that:

1.

I have reviewed this annual report on Form 10-K of Inland Western Retail Real Estate Trust, Inc.;

2.

Based on my knowledge, this 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 report;

3.

Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4.

The registrant's other certifying officer(s) 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 have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 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 disclosure 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 report based on such evaluation, and

d)

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

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control 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 control over financial reporting.

	/s/ Steven P. Grimes
By:	Steven P. Grimes
	President, Chief Executive Officer, Chief Financial Officer and Treasurer
Date	February 23, 2011

EX-31.2

Exhibit 31.2

CERTIFICATION

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, James W. Kleifges, certify that:

1.

I have reviewed this annual report on Form 10-K of Inland Western Retail Real Estate Trust, Inc.;

2.

Based on my knowledge, this 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 report;

3.

Based on my knowledge, the financial statements, and other financial information included in this 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 report;

4.

The registrant's other certifying officer(s) 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 have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 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 disclosure 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 report based on such evaluation, and

d)

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

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control 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 control over financial reporting.

	/s/ James W. Kleifges
By:	James W. Kleifges
	Executive Vice President and Chief Accounting Officer
Date:	February 23, 2011

EX-32.1

Exhibit 32.1

Certification Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report on Form 10-K of Inland Western Retail Real Estate Trust, Inc. (the "Company") for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Steven P. Grimes as Chief Executive Officer, President, Chief Financial Officer and Treasurer and James W. Kleifges as Chief Accounting Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	/s/ Steven P. Grimes
Name:	Steven P. Grimes
	President, Chief Executive Officer, Chief Financial Officer and Treasurer
Date:	February 23, 2011
	/s/ James W. Kleifges
Name:	James W. Kleifges
	Executive Vice President and Chief Accounting Officer
Date:	February 23, 2011