ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

This report on Form 10-Q contains certain “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 which provides a “safe harbor” for these types of statements.  You can identify these forward-looking statements by forward-looking words such as “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “seek,” “plan,” “expect,” “should,” “would” and similar expressions in this report on Form 10-Q.  These forward-looking statements are subject to a number of risks, uncertainties and assumptions about Price Legacy, including, among other things:

•                   the effect of economic, credit and capital market conditions in general and on real estate companies in particular, including changes in interest rates

•                   government approvals, actions and initiatives, including the need for compliance with environmental requirements

•                   our ability to continue to qualify as a real estate investment trust, or REIT

The factors identified above are believed to be some, but not all, of the important factors that could cause actual events and results to be significantly different from those that may be expressed or implied in any forward-looking statements.  Any forward-looking statements should also be considered in light of the information provided in “Factors That May Affect Future Performance” located in our Form 10-K filing for the 2002 fiscal year.  We assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our reports on Forms 10-K, 10-Q and 8-K filed with the SEC.  Our Form 10-K filing for the 2002 fiscal year listed various important factors that could cause actual results to differ materially from expected and historic results.

In Management’s Discussion and Analysis we explain our general financial condition and results of operations including:

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Critical Accounting Policies and Estimates

General

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).  Preparation of our financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related notes.  We believe that the following accounting policies are critical because they affect the more significant judgments and estimates used in the preparation of our consolidated financial statements.  Actual results may differ from these estimates under different assumptions or conditions.  For a detailed discussion on the application of these and other accounting policies, see Note 1 in the Notes to the Consolidated Financial Statements in Item 8 of our Annual Report on Form 10-K, as amended, for the 2002 fiscal year.

Consolidation

We combine our financial statements with those of our wholly-owned subsidiaries as well as all affiliates in which we have control and present them on a consolidated basis.  The consolidated financial statements do not include the results of transactions between us and our subsidiaries or among our subsidiaries.

Revenue Recognition

Recognition of revenue is dependent upon the quality and ability of our tenants to pay their rent in a timely manner.  Rental revenues include: (1) minimum annual rentals, adjusted for the straight-line method for recognition of fixed future increases; (2) additional rentals, including recovery of property operating expenses, and certain other expenses which we accrue in the period in which the related expense occurs; and (3) percentage rents based on the level of sales achieved by the lessee, which we recognize when earned.

Gain or loss on sale of real estate is recognized when the sales contract is executed, title has passed, payment is received, and we no longer have continuing involvement in the asset.

Real Estate Assets and Depreciation

We record real estate assets at historical costs and adjust them for recognition of impairment losses.  In following purchase accounting, we adjusted the historical costs of Excel Legacy’s real estate assets to fair value at the time of the Merger.  Our consolidated balance sheets at June 30, 2003 and December 31, 2002 reflect the new basis of those real estate assets.

We expense as incurred ordinary repairs and maintenance costs, which include building painting, parking lot repairs, etc.  We capitalize major replacements and betterments, which include HVAC equipment, roofs, etc., and depreciate them over their estimated useful lives.

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We compute real estate asset depreciation on a straight-line basis over their estimated useful lives, as follows:

We review long-lived assets for impairment when events or changes in business conditions indicate that their full carrying value may not be recovered.  We consider assets to be impaired and write them down to fair value if their expected associated future undiscounted cash flows are less than their carrying amounts.

We capitalize interest incurred during the construction period of certain assets and this interest is depreciated over the lives of those assets.

Pre-development costs that are directly related to specific construction projects are capitalized as incurred.  We expense these costs to the extent they are unrecoverable or it is determined that the related project will not be pursued.

Derivative Instruments and Hedging Activities

We follow the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”  In the normal course of business, we may use derivative financial instruments to manage or hedge interest rate risk.  When entered into, we formally designate and document the financial instrument as a hedge of a specific underlying exposure, as well as the risk management objectives and strategies for undertaking the hedge transactions.  We assess, both at the inception and at least quarterly thereafter, whether the financial instruments that are used in hedging transactions are effective at offsetting changes in either the fair value or cash flows of the related underlying exposure.  Because of the high degree of effectiveness between the hedging instrument and the underlying exposure being hedged, fluctuations in the value of the derivative instruments are generally offset by changes in the fair value or cash flows of the underlying exposures being hedged.  Any ineffective portion of a financial instrument’s change in fair value is immediately recognized in earnings. Virtually all of our derivatives are straightforward over-the-counter instruments with liquid markets.

To determine the fair values of derivative instruments, we use a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date.  For the majority of financial instruments including most derivatives, long-term investments and long-term debt, standard market conventions and techniques such as discounted cash flow analysis, option pricing models, replacement cost, and termination cost are used to determine fair value. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

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Asset Disposal

In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”  SFAS No. 144 addresses financial accounting for the impairment or disposal of long-lived assets and is effective in fiscal years beginning after December 15, 2001.  We have adopted this statement and report discontinued operations for the quarter and six month periods ended June 30, 2003 and June 30, 2002.

Revenues increased $4.2 million to $32.2 million in the second quarter of 2003 compared to the same period in 2002 primarily because:

•                   properties we acquired during 2002 generated $3.7 million of additional revenues

•                   properties we owned both years generated $0.5 million of additional revenues, primarily due to additional leasing activity at our Newport, KY and Moorestown, NJ properties and the opening of our Temecula, CA property.  These increases were partially offset by vacancies at our Westbury, NY property due to Kmart’s bankruptcy  and our Wayne, NJ property due to Today’s Man and The Wiz bankruptcies

Revenues increased $9.0 million to $63.9 million in the six month year-to-date period of 2003 compared to the same period in 2002 primarily because:

•                   properties we acquired during 2002 generated $7.7 million of additional revenues

•                   properties we owned both years generated $1.3 million of additional revenues, primarily due to additional leasing activity at our Newport, KY and Moorestown, NJ locations and the opening of our Temecula, CA property.  These increases were partially offset by vacancies at our Westbury, NY, Wayne, NJ, and Miami, FL properties due to the bankruptcies of Kmart, Today’s Man, and The Wiz.

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Expenses increased $4.4 million to $18.3 million in the second quarter of 2003 compared to 2002 primarily because:

•                   expenses on properties we owned both years increased $2.9 million, primarily due to increased depreciation at our Newport, KY location and increased bad debt expense at our Wayne, NJ property due to the bankruptcies of Today’s Man and The Wiz

•                   expenses on properties we acquired in 2002 generated $1.3 million of additional expenses in 2003

•                   general and administrative expense increased $0.2 million, primarily due to additional legal expenses

Expenses increased $5.8 million to $34.5 million for the year-to-date period ended June 30, 2003 compared to 2002 primarily because:

•                   expenses from properties we owned in both years increased by $3.7 million, primarily due to increased depreciation expense at our Newport, KY location and increased bad debt expense at our Wayne, NJ property due to the bankruptcies of Today’s Man and The Wiz

•                   expenses on properties we acquired in 2002 generated $2.6 million of additional expenses in 2003

•                   these increases to expenses were partially offset by a decrease to general and administrative expenses of $0.6 million due to higher legal costs in the first quarter of 2002 related to our investment in Destination Villages, LLC

Operating income decreased for the second quarter and increased for the year-to-date periods of 2003 compared to the same periods in the prior year primarily because of the changes in Rental Revenues and Expenses discussed above.

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Interest expense increased $1.0 million in the second quarter of 2003 compared to 2002 because during the second quarter of 2003 we had an average of $558.2 million debt outstanding compared to $494.4 million in the second quarter of 2002.  Interest expense increased $1.4 million for the six month year-to-date period compared to 2002 because we had an average of $552.9 million debt outstanding compared to $492.7 million during the same period of 2002.  The increase in interest expense due to the amount of debt outstanding was partially offset by a decrease in interest rates on our variable rate debt.

The weighted average interest rate on our variable rate debt decreased to 2.8% on June 30, 2003 from 3.5% on June 30, 2002.  We discuss our outstanding debt further in “Liquidity and Capital Resources” located elsewhere in this Form 10-Q.

Interest income decreased $1.0 million in the second quarter of 2003 compared to 2002 primarily because:

•                   we stopped accruing interest on certain notes receivable when development projects were added as collateral in 2002 to repay the notes, which decreased interest income by $0.9 million

•                   in the third quarter of 2002, we retired the notes receivable from certain of our officers which were collateralized by our common shares.  Emerging Issues Task Force 00-23 required us to account for these loans as being retired and the shares as being repurchased.  This decreased interest income by $0.2 million

Interest income decreased $1.5 million in the six month year-to-date period ended June 30, 2003 compared to the same period in 2002 primarily because:

•                   we stopped accruing interest on certain notes receivable when development projects were added as collateral in 2002 to repay the notes, which decreased interest income by $1.0 million

•                   officers’ notes receivable, which we retired in 2002, decreased interest income $0.4 million

•                   interest income on our outstanding cash balances decreased $0.1 million

Gain/Loss on Sale of Real Estate

During the first six months of 2003, we sold the following properties for a net loss of $2.5 million.  This loss is recorded as discontinued operations in the Consolidated Statements of Operations in accordance with SFAS No.144:

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Also during 2003, we received payment on three notes receivable related to the sale of our self storage development properties in 2002.  We recognized a gain of $0.7 million on the sales.

During the first six months of 2002, we sold the following non-depreciable properties for a net gain of $0.3 million:

Also during the first six months of 2002, we sold the following operating property and recorded a net loss of $0.8 million.  This loss is recorded as discontinued operations in the Consolidated Statements of Operations in accordance with SFAS No.144.

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Our Company, as well as real estate industry analysts, generally considers FFO as another measurement of economic profitability for real estate-oriented companies.  The Board of Governors of the National Association for Real Estate Investment Trusts (NAREIT) defines FFO as net income in accordance with GAAP, excluding depreciation and amortization expense and gains (losses) from depreciable operating real estate.  We calculate FFO in accordance with the NAREIT definition which also excludes provisions for asset impairments and gains (losses) from the sale of investments, and adjust for preferred dividends.  We believe that FFO is helpful to investors as a measure of our financial performance because, along with cash flow from operating activities, financing activities and investing activities, FFO provides investors with an indication of the ability of a REIT to incur and service debt, to make capital expenditures and to fund other cash needs.  In addition, we believe that FFO provides useful information about our performance when compared to other REITs since FFO is generally recognized as the industry standard for reporting the operations of REITs.  FFO does not represent the cash flows from operations defined by GAAP, may not be comparable to similarly titled measures of other companies and should not be considered as an alternative to net income as an indicator of our operating performance or to cash flows as a measure of liquidity.  Excluded from FFO are significant components in understanding our financial performance.

FFO before preferred dividends during the second quarter of 2003 decreased $3.3 million or 18.6% to $14.6 million compared to the second quarter of 2002 primarily because:

•                   properties sold contributed an additional $4.3 million to FFO in the prior year, primarily due to a lease termination fee of $2.3 million received in 2002 for a property we sold in 2003

•       joint venture income contributed an additional $1.1 million to FFO in the current quarter

FFO before preferred dividends during the six month year-to-date period of 2003 decreased $2.6 million or 8.2% to $29.1 million compared to the second quarter of 2002 primarily because:

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Liquidity and Capital Resources

Liquidity refers to our ability to generate sufficient cash flows to meet the short and long-term cash requirements of our business operations.  Capital resources represent those funds used or available to be used to support our business operations and consist of stockholders’ equity and debt.

Cash flow from operations has been the principal source of capital to fund our ongoing operations and dividend payments, while asset sales and use of our credit facilities and mortgage financing have been the principal sources of capital required to fund our growth.  While we are positioned to finance our business activities through a variety of sources, we expect to satisfy short-term liquidity requirements through net cash provided by operations and through borrowings.

Dividends

As a REIT, we are required to distribute 90% of our taxable income, excluding capital gains, in dividends.  Our Series A Preferred Stock requires a quarterly dividend payment of $9.6 million, an annual total of $38.4 million.  In connection with the Merger, we assumed a net operating loss (NOL) of approximately $18.7 million, which could be used to offset federal taxable income.  In the future, if our Series A Preferred dividend is less than 90% of our taxable income (after applying any applicable NOLs), we have two options to meet the distribution requirement:

1)               We can declare a Series B Preferred Stock dividend by issuing additional Series B Preferred shares.  The Series B Preferred Stock dividends accumulate at a rate of 9%, compounded quarterly, payable in additional shares of Series B Preferred Stock until June 2005, and 10%, compounded quarterly, payable in cash thereafter.  As of June 30, 2003, the Series B Preferred stockholders were entitled to approximately 3.4 million additional shares.

2)               We can declare a dividend to our common stockholders.

If our taxable income is less than the Series A Preferred Stock dividends, we are still obligated to pay them.  If we are unable to pay these dividends when due, they accumulate until paid.

Debt

In September 2001, we obtained a $100.0 million unsecured credit facility with Fleet Bank as agent.  The facility has a three-year term and has a current interest rate of LIBOR plus 187.5 basis points.  The rate may vary between 150 and 200 basis points based on our leverage and other financial ratios.  At June 30, 2003, we had $64.7 million outstanding on the facility at a 3.1% weighted average interest rate.

Our credit facility requires us to comply with specified financial covenants, the most restrictive of which relate to fixed charge coverage and leverage.  Covenants in some of our construction

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loans are also tied to our credit facility.  We were in compliance with all covenants in our credit facility at June 30, 2003.  To the extent that we violate any of these covenants in the future, we would need to obtain waivers from our lenders to maintain compliance.  We cannot assure that any such waivers would be forthcoming.

In 2003 we had or will have the following significant debt maturities:

•                   In April 2003, a $38.5 million construction loan related to our project in Newport, KY matured.  We extended the loan for another year and paid-down $10.0 million on the outstanding amount.  The current loan balance is $28.5 million.

•                   In April 2003, a $22 million loan related to our project in Orlando, FL matured.  We refinanced this debt with a new loan which matures in June 2008.

•                   In May 2003, a $4.7 million loan related to our property in Newport, KY matured.  The lender extended this loan for another year.

•                   In June 2003, a $3.2 million loan related to our property in Terre Haute, IN matured.  We repaid this loan with available cash.

•                   On August 31, 2003 we will repay a $3.1 million capital lease obligation related to our Scottsdale, AZ office building at the lessor’s request.  We plan to repay this obligation with available cash.

On September 28, 2003, a $6.3 million note related to our Anaheim project matures.  We plan to repay this note with available cash or borrowing on our unsecured line of credit.

The following table summarizes all of our long-term contractual obligations, excluding interest, to pay third parties as of June 30, 2003:

In 2003 we plan to use cash flow from operations to fund our recurring debt service obligations.

Off-Balance Sheet Financing Matters

The City of Newport, KY in 1999 issued two series of public improvement bonds related to our project in Newport, KY.  The Series 2000a tax exempt bonds total $44.2 million and are broken down as follows: (a) $18.7   million maturing 2018 with interest at 8.375%; (b) $20.5 million maturing 2027 with interest at 8.5%; and (c) $5.0 million maturing 2027 with interest at 8.375%.  The Series 2000b bonds are taxable and have a par amount of $11.6 million with interest at 11% due 2009.  The bonds are guaranteed by the Newport project, the Company, and the project’s third party developers.  As of June 30, 2003, Newport had drawn on $48.6   million of the bonds for construction incurred prior to that date.

We also have guaranteed the following off-balance sheet debt with maturities in 2003:

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•                   On February 28, 2003, a $12.9 million bank loan related to a development project in Scottsdale, AZ matured.  We have a note receivable to a developer related to this project and guaranteed the bank loan.  On February 27, 2003, we purchased the loan from the lender for an aggregate purchase price of $13.0 million, which was funded through borrowing on our credit facility.

•                   We have a $10.3 million loan related to land we own in Orlando, FL through a joint venture.  This loan is guaranteed by us and by our partner.  Beginning November 2003, the loan requires monthly principal repayments of $1.5 million.  If this land is not refinanced before November 2003, we anticipate funding these repayments on behalf of the partnership.  In April 2003, we repaid $1.0 million on this loan with funds we received as a non-refundable deposit from a potential buyer.

Summarized debt information for our unconsolidated joint ventures and the amount guaranteed by us at June 30, 2003 is as follows:

In addition, we have guaranteed a $4.5 million note payable to a third party lender which matures in April 2004 relating to an office building in Phoenix, AZ on which we have notes receivable of $1.0 million in principal amount.

In connection with the sale of three self storage development properties in September 2002, we agreed to guarantee $19.3 million of debt associated with the properties that was assumed by the buyer in the transaction.  In January 2003, the guarantee was reduced to $4.6 million and the remaining $4.6 million guarantee was eliminated in May 2003.

Development

We have a significant retail project in Newport, KY.  The majority of the construction was completed in October 2001, with all of the primary buildings completed except for one out parcel yet to be leased.  The project opened in October 2001.  At June 30, 2003, the project was approximately 78% occupied, excluding ground leases.  As the project becomes fully leased, there may be capital required to fund the remaining tenant improvements.

The Anaheim GardenWalk project in Anaheim, CA, located between Disney’s two Theme Parks on Harbor Boulevard and Disney’s new proposed Theme Park on Katella Avenue is expected to consist of a 626,000 square foot open-air retail center and four hotels.  Total cost of the retail portion of this project will be approximately $250 million with an estimated cost of $200 million remaining to complete construction over the next eight years for all phases.  We anticipate that

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the first phase of the project will cost approximately $125 million.  We are currently evaluating our options on this project.

We also have retail development projects in which construction will continue through 2004.  The Temecula, CA project is an open-air retail shopping center with Wal-Mart, Kohl’s and other tenants.  We estimate $0.6 million remaining to complete construction.  We expect to fund the remaining cost through a construction loan.  In December 2002, we purchased additional land adjacent to this development project to develop an additional open-air retail center.  We estimate the total cost of this development to be approximately $14.4 million with an estimated $9.8 million remaining to complete construction, which we plan to fund through a construction loan.

In November 2002, we purchased land adjacent to our property in Orlando, FL to develop an open-air retail center.  We estimate the total cost of this development to be approximately $21 million with an estimated $9.3 million remaining to complete construction, which we will fund through a construction loan.

Notes Receivable

We had $59.0 million in principal amount of third party notes receivable outstanding as of June 30, 2003 related to various real estate developments and related businesses.  The notes bear interest ranging from 2.0% to 15% per annum.  The notes generally do not require cash payments of interest until specified future dates, typically when developments are completed or sold.  As of June 30, 2003, we had $14.9 million of accrued but unpaid interest on these notes.  Of this amount, we assumed $11.5 million from the Merger with Excel Legacy.  We typically do not recognize interest income on these notes receivable until development projects begin operations.  Of the $59.0 million in notes receivable, as of June 30, 2003, the notes receivable from companies owned by or affiliated with Steven Ellman (the Ellman Companies) had an aggregate outstanding principal balance of approximately $57.5 million and the aggregate outstanding accrued interest on such notes receivable was approximately $14.9 million.  Notes receivable of $12.2 million (principal amount and accrued interest) matured in 2002 and on-going negotiations with the Ellman Companies contemplate an extension of the maturity dates of these notes receivable to up to December 31, 2004.  The remainder of the notes receivable mature at various dates in 2003 or 2004 or earlier if the related development is sold.  Repayment of the notes depends upon the completion of the various development projects or other events.  The notes receivable are generally non-recourse obligations, but are typically collateralized by either real estate liens or pledges of ownership interests in the borrower or affiliated entities.

Growth

We continue to evaluate various properties for acquisition or development and continue to evaluate other investment opportunities.  We anticipate borrowing available amounts on our credit facility or mortgages to fund these acquisition and development opportunities.  We also anticipate obtaining construction loans to fund our development activities.  We did not purchase any properties during the first six months of 2003.

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From time to time we will consider selling properties to better align our portfolio with our geographic and tenant composition strategies.  We may also participate in additional tax-deferred exchange transactions, which allow us to dispose of properties and reinvest the proceeds in a tax efficient manner.  During the six months ended June 30, 2003 we sold four properties and a land parcel for $16.4 million.  When we sell an operating property, we anticipate a temporary reduction in operating income due to the time lag between selling a property and reinvesting the proceeds.

We are contemplating purchasing various properties and selling certain other properties.  As we sell properties, our cash flows from operations may decrease until the proceeds are reinvested into new properties.

Litigation

We own a 55% interest in Destination Villages LLC, which indirectly owns a hospitality project located in Bermuda, Daniel’s Head Village Resort (Daniel’s Head).  Daniel’s Head was closed in the fourth quarter of 2001, primarily due to low occupancy rates as a result of the terrorist events in the United States that occurred on September 11, 2001.  The project was encumbered by a $6 million loan with a Bermuda bank.  In March 2002, we informed the Bermuda bank that we did not intend to re-open this project due to large projected operating losses and instead intended to sell the project to an identified buyer.  This resulted in a default of the loan.  On March 27, 2002, the Bermuda bank exercised its rights under Bermuda law and put the project in “receivership,” which gives the bank the right to negotiate directly with this buyer as well as other potential buyers.  On June 13, 2002 the Bermuda Bank filed a lawsuit against us in Bermuda for $6.1 million plus other costs related to a guarantee agreement for a promissory note on the Destination Villages Daniel’s Head project in Bermuda.  We believe we were in full compliance with the guarantee and intend to vigorously defend the lawsuit.  On June 3, 2003, trial of this matter commenced in Bermuda.  On June 6, 2003, the trial was temporarily suspended due to illness of counsel.  The matter is currently expected to be reset by the court for November 2003.

On or about February 13, 2001, Lewis P. Geyser filed a lawsuit against Excel Legacy in Santa Barbara County Superior Court, Anacapa Division, Case No. 01038577.  The suit arose out of an Operating Agreement for Destination Villages, LLC, an entity which is owned jointly by Excel Legacy and Mr. Geyser, under which Destination Villages, LLC would develop certain eco-tourism resorts.  The complaint included causes of action for breach of contract, breach of fiduciary duty, fraud and negligent misrepresentation.  The lawsuit included a prayer for compensatory and punitive damages.  Excel Legacy had also filed a cross-complaint against Mr. Geyser for breach of contract, fraud, breach of fiduciary duty and other related claims.

The trial of this matter began February 26, 2002 and concluded on March 19, 2002.  The trial judge dismissed both the complaint and cross-complaint, and granted nothing to Mr. Geyser under any of his allegations.  On June 5, 2002, Mr. Geyser filed an appeal and Excel Legacy subsequently filed a cross-appeal against Mr. Geyser.  On May 12, 2003, the appellate court reversed the judgment of dismissal on the complaint and cross-complaint and remanded the case for retrial.  The court has not yet set a date for the retrial of the matter.  We believe that our

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positions have merit and intend to vigorously defend against Mr. Geyser’s claims and pursue our counterclaims.

Other

In April 2002, we entered into five Interest Rate Swap Agreements with Fleet Bank that are accounted for under SFAS No. 133 and sold them in October 2002.  The combined notional amount was approximately $161 million and the maturities ranged from 2009 to 2010.  We paid monthly interest of LIBOR plus 3.08% to 3.77% and Fleet Bank assumed our fixed rates of 8.18% to 9.00%.  These swaps hedged the fair value of fixed-rate debt.  In October 2002, we sold the five swaps back to the counter party for $13.8 million and will amortize the gain over the fixed-rate debt’s remaining life through 2009 to 2010.

In July 2002, we entered into four Interest Rate Cap Agreements with Wells Fargo Bank and Fleet Bank that are also accounted for under SFAS No. 133.  The combined notional amount is $152.0 million and the maturities range from 2009 to 2010.  The agreements cap our variable rate risk on one month LIBOR interest at 7%.

Inflation

Because a substantial number of our leases contain provisions for rent increases based on changes in various consumer price indices, based on fixed rate increases, or based on percentage rent if tenant sales exceed certain base amounts, we do not expect inflation to have a material impact on future net income or cash flow from developed and operating properties.  In addition, substantially all retail leases are triple net, which means specific operating expenses and property taxes are passed through to the tenant.