MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Years Ended December 31, 2001 and 2000 Revenues for the year ended December 31, 2001 (“2001”), totaled $86,308,000 compared to $79,029,000 for the comparable period in 2000 (“2000”), an increase of $7,279,000 (9.2%). Real estate taxes were $7,226,000 in 2001 compared to $6,451,000 in 2000, representing an increase of $775,000 (12.0%). Approximately half of the increase was attributable to development properties placed in service during the latter half of 2000 and during 2001. Approximately a quarter of the increase resulted from an assessment increase for the Company’s Thruway shopping center. Base rent increased to $69,662,000 in 2001 from $63,837,000 in 2000, representing a $5,825,000 (9.1%) increase. The increase in base rent resulted primarily from new leases in effect at recently developed and acquired properties: Ashburn  Village II and III and a portion of Washington  Square (approximately 100,000 square feet)  during 2001. Interest expense was $24,920,000 in 2001 compared to $23,843,000 in 2000, representing  an increase of $1,077,000 (4.5%). The increase in interest expense resulted from increased borrowings related to the development and acquisition of properties placed in service during 2001 and 2000. Amortization of deferred debt expense was $566,000 in 2001 compared to $458,000 in 2000, an increase of $108,000 (23.6%). The increase resulted from a full year of amortizing the costs of renewing and amending the Company’s revolving line of credit in July 2000 and $38 million of new long term debt put in place during 2000 and 2001. Expense recoveries increased to $11,456,000 in 2001 from $10,129,000 in 2000, representing an increase of $327,000 (2.9%).  Percentage rent was $2,113,000 in 2001, compared to $2,097,000 in 2000, representing an increase of $16,000 (0.8%). Other income, which consists primarily of parking income at three of the Office Properties, kiosk leasing, temporary leases and payments associated with early termination of leases, was $3,077,000 in 2001, compared to $1,966,000 in 2000, representing an increase of $1,111,000 (56.5%). The increase in other income resulted from a $442,000 increase in lease termination payments compared to the prior year, collection of $363,000 from the estate of a former tenant in bankruptcy and a $304,000 increase in parking rents primarily due to the commencement of operations at Washington Square. Depreciation and amortization expense was $14,758,000 in 2001 compared to $13,534,000  in 2000, representing an increase of $1,224,000 (9.0%). The increase resulted from increased amortization of leasing costs and depreciation of construction costs related to newly developed and acquired properties placed in service during 2001 and 2000.  General and administrative expense, which consists primarily of administrative payroll and other overhead expenses, was $4,335,000 in 2001 compared to $3,891,000 in 2000, representing an increase of $444,000 (11.4%). Approximately half  of the year over year increase resulted from additional payroll expenses and a quarter of the increase resulted from the write-off of abandoned acquisition costs. Operating expenses, which consist mainly of repairs and maintenance, utilities, payroll and insurance expense, increased $232,000 (2.8%) to $8,503,000 in 2001 from $8,271,000 in 2000.  The provision for credit losses was $617,000 in 2001 compared to $467,000 in 2000, representing an increase of $150,000 (32.1%). The comparative credit loss increase resulted primarily from additions to credit loss reserves for three retail tenants and  an office tenant in bankruptcy and unpaid rents  in dispute with two shopping center tenants and  an office tenant. 38