2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements, although management believes that the disclosures presented herein are adequate to make the accompanying unaudited consolidated interim financial statements not misleading. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated annual financial statements and the notes thereto included in Winthrop’s Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC. In the opinion of management, all adjustments considered necessary for fair statements have been included, and all such adjustments are of a normal recurring nature. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the operating results for the full year.

The accompanying unaudited consolidated interim financial statements represent the consolidated results of Winthrop, its wholly-owned taxable REIT subsidiary, WRT-TRS Management Corp., the Operating Partnership and all majority-owned subsidiaries and affiliates over which the Trust has financial and operating control and variable interest entities (“VIE”s) in which the Trust has determined it is the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation. The Trust accounts for all other unconsolidated joint ventures using the equity method of accounting. Accordingly, the Trust’s share of the earnings of these joint ventures and companies is included in consolidated net income.

Reclassifications

Discontinued operations for all periods presented in the Consolidated Statements of Operations include the operations of the Trust’s residential property in Meriden, Connecticut which was disposed of in February 2014, the Trust’s retail properties in Denton, Texas and Seabrook, Texas which were disposed of in 2013 and the Trust’s office properties in Lisle, Illinois, Deer Valley, Arizona and Andover, Massachusetts which were disposed of in 2013 and its office properties in Englewood, Colorado, Chicago, Illinois (River City) and Amherst, New York which were sold in 2014. Also included in discontinued operations for the periods presented are the operations of the Trust’s retail property located in Louisville, Kentucky which is under contract to be sold and is classified as held for sale at June 30, 2014.

Earnings Per Share

The Trust determines basic earnings per share on the weighted average number of Common Shares outstanding during the period and reflects the impact of participating securities. The Trust computes diluted earnings per share based on the weighted average number of Common Shares outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments.

The Trust has calculated earnings per share in accordance with relevant accounting guidance for participating securities and the two class method. The reconciliation of earnings attributable to Common Shares outstanding for the basic and diluted earnings per share calculation is as follows (in thousands, except per share data):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2014			2013			2014			2013
Basic
Income (loss) from continuing operations	$	210		$	1,050		$	(4,972	)	$	10,648
Loss attributable to non-controlling interest		1,980			653			3,369			1,473
Preferred dividend of Series D Preferred Shares		(2,786	)		(2,786	)		(5,573	)		(5,573	)
Amount allocated to Restricted Shares		(97	)		(98	)		(192	)		(124	)

Income (loss) from continuing operations applicable to Common Shares		(693	)		(1,181	)		(7,368	)		6,424
Income from discontinued operations		6,772			6,695			11,151			10,048
(Income) loss attributable to non-controlling interests from discontinued operations		—			(24	)		54			(49	)

Net income applicable to Common Shares for earnings per share purposes	$	6,079		$	5,490		$	3,837		$	16,423


Basic weighted-average Common Shares		35,824			33,037			35,820			33,032


Income (loss) from continuing operations	$	(0.02	)	$	(0.03	)	$	(0.20	)	$	0.20
Income from discontinued operations		0.19			0.20			0.31			0.30

Net income per Common Share - Basic	$	0.17		$	0.17		$	0.11		$	0.50

Diluted
Income (loss) from continuing operations	$	210		$	1,050		$	(4,972	)	$	10,648
Loss attributable to non-controlling interest		1,980			653			3,369			1,473
Preferred dividend of Series D Preferred Shares		(2,786	)		(2,786	)		(5,573	)		(5,573	)
Amount allocated to Restricted Shares		(97	)		(98	)		(192	)		(124	)

Income (loss) from continuing operations applicable to Common Shares		(693	)		(1,181	)		(7,368	)		6,424
Income from discontinued operations		6,772			6,695			11,151			10,048
(Income) loss attributable to non-controlling interests from discontinued operations		—			(24	)		54			(49	)

Net income applicable to Common Shares for earnings per share purposes	$	6,079		$	5,490		$	3,837		$	16,423


Basic weighted-average Common Shares		35,824			33,037			35,820			33,032
Stock options (1)		—			—			—			2
Restricted shares (2)		—			—			—			7

Diluted weighted-average Common Shares		35,824			33,037			35,820			33,041


Income (loss) from continuing operations	$	(0.02	)	$	(0.03	)	$	(0.20	)	$	0.20
Income from discontinued operations		0.19			0.20			0.31			0.30

Net income per Common Share - Diluted	$	0.17		$	0.17		$	0.11		$	0.50

(1)

The Trust’s stock options were exercised in 2013. The resulting shares were included in the basic weighted-average shares outstanding for the three and six months ended June 30, 2014. The Trust’s outstanding stock options were anti-dilutive for the three months ended June 30, 2013 and are not included in the weighted-average shares outstanding for the calculation of diluted earnings per Common Share. The Trust’s outstanding stock options were dilutive for the six months ended June 30, 2013.

(2)

The Trust’s Restricted Shares were anti-dilutive for the three months ended June 30, 2013 and the three and six months ended June 30, 2014 and are not included in the weighted-average shares outstanding for the calculation of diluted earnings per Common Share. The Trust’s Restricted Shares were dilutive for the six months ended June 30, 2013.

For the quarter ended June 30, 2014, the Trust paid a regular quarterly dividend of $0.1625 per Common Share and a regular quarterly dividend of $0.578125 per Series D Preferred Share.

Recently Issued Accounting Standards

On April 10, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08: Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity to update the criteria for reporting discontinued operations. The amendments require that a disposal of a component of an entity be reported as discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the entity’s operations. The new disclosure requirements are effective prospectively for annual reporting periods beginning on or after December 15, 2014 and do not impact the current financial statements. The new disclosures are required for both interim and annual reporting. The Trust did not elect early adoption of the amendments. The Trust is currently evaluating the amendments and does not anticipate that adoption will have a material impact on the consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. The Trust is currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on the Trust’s financial position or results of operations.