Glimcher Realty Trust 2006 Annual Report

6 Annual Report / 2006 Annual Report / 2006 Annual Report / 2006 Annual Report / DEAr ShArEholDErS, 2006 proved to be a successful year for Glimcher realty Trust. We finished the year with strong results, posting record mall store occupancy of close to 92% while generating solid net operating growth during the fourth quarter. We are also pleased with the direction and progress made in aggressively repositioning the Company’s real estate portfolio and significantly improving the growth profile of the Company as we look to the future. As always, people were at the core of our successes this year. I am proud of the exceptional teamwork and collaboration exhibited throughout the organization and believe that every associate shares my excitement about the future at Glimcher. As we have previously discussed, addressing overall asset quality is at the core of our long-term growth strategy. The next major step involves executing our mall disposition plan announced during 2006. Selling these five mall properties will immediately improve the quality metrics and growth profile of our portfolio. Excluding these properties, sales per square foot were $362 and mall store occupancy peaked at over 94% as of December 31, 2006. These dispositions will also free up important capital to invest in the ongoing redevelopment of existing properties, selective ground-up development of premium retail properties and the acquisition of new higher income growth assets. We are starting to see real progress with respect to our disposition plan. We currently have several of these malls under contract to be sold within the next few months. We spent nearly $30 million in 2006 reinvesting in our core portfolio through redevelopment. The majority of the dollars were invested in our Dayton Mall Streetscapes expansion, which opened during the fourth quarter. This project includes over 100,000 square feet of retail and restaurant space and has introduced a number of names new to the Dayton market. We are also in the final planning stages of our open-air development project at Polaris Fashion Place. The plan calls for the replacement of the existing Kaufmann’s building with approximately 150,000 square feet of retail and restaurant space. We have targeted a 2008 opening. As in our Dayton project, this development allows us to bring in additional upscale retailers and restaurants, at attractive yields. In addition to Dayton and Polaris, we have several other projects already underway or in the planning stages as we look to reinvest and strengthen our core portfolio. In terms of building quality, we continue to focus selectively on ground-up development of premium retail properties, generally working with partners who have control of the land with approved zoning and entitlements already in place. This strategy allows us to limit our pre-development risk and bring on projects more quickly than the traditional development model. We have been working on several opportunities under this format. (continued) DEAr ShArEholDErS (continued) The first project consists of 650,000 square feet of retail and office space located in the heart of Scottsdale, AZ. The site, which is contiguous to some of the most highly productive retail centers in the state, has a tremendous daytime population as well as some of the strongest demographics in the valley. The planned project also includes a hotel and residential component that will be developed by others. The response and interest received to date from prospective tenants has only confirmed our confidence in this project. our most recently planned project includes approximately in Surprise, AZ. Michael P. Glimcher, 100 acreslocated in the Surprise, President & Chief Executive officer northwest Phoenix area, is one of the fastest-growing communities in the country. The proposed project involves an anchored open-air center with approximately one million square feet of retail. We are currently working on assembling the critical mass of anchor and specialty retailers necessary to move forward with the project. GlIMChEr rEAlTY TrUST From an acquisition perspective, we continue to focus on anchored retail properties throughout the continental United States. Despite a competitive acquisition market, we have closed on $230 million of acquisitions over the last year and a half with one of our strategic joint venture partners. Finding attractive opportunities at responsible prices continues to be a challenge as abundant capital continues to compete in the marketplace. As always, we will continue to remain disciplined in terms of quality and pricing. The Company’s balance sheet remains well positioned to support our long-term growth strategy. our debt-to-total market capitalization at December 31, 2006 (including the Company’s pro-rata share of joint venture debt) was 56.3%, well within our targeted range of 50% to 60%. Fixed rate debt represented 86% of the Company’s total outstanding borrowings at December 31, 2006, providing us a degree of protection should interest rates rise. We were also able to expand our line of credit facility capacity by $170 million to a total of $470 million, providing us with enhanced financial flexibility as we move forward with our asset management strategy. We are proud of the trust and confidence shown from our financial partners, both existing and new. As we begin 2007, we are extremely enthusiastic about the future at Glimcher and our ability to deliver accelerated growth and shareholder value. With a great team in place, we finished the year with record same-store occupancy. Sales growth and re-leasing spreads have been solid over the last two years, and we are starting to see real progress with respect to our disposition program. We also expect to break ground soon on our Scottsdale project, one of the premier retail developments in the country. We appreciate everyone’s interest and look forward to sharing our progress throughout the remainder of the year. Thank you for your continued support of Glimcher realty Trust. Sincerely, Michael P. Glimcher, President & Chief Executive officer Market Information & Additional Financial Disclosures The common shares of beneficial interest (the “Common Shares”) are currently listed and traded on the New York Stock Exchange (“NYSE”) under the symbol “GrT.” on February 22, 2007, the last reported sales price of the Common Shares on the NYSE was $29.21. The following table shows the high and low sales prices for the Common Shares on the NYSE for the 2006 and 2005 quarterly periods indicated as reported by the New York Stock Exchange Composite Tape and the cash distributions per Common Share paid by GrT with respect to each such period. GrT has implemented a Distribution reinvestment and Share Purchase Plan (the “Plan”) under which its shareholders or Glimcher Properties limited Partnership unit holders may elect to purchase additional Common Shares and/or automatically reinvest their distributions in Common Shares. In order to fulfill its obligations under the Plan, GrT may purchase Common Shares in the open market or issue Common Shares that have been registered and authorized specially for the plan. As of December 31, 2006, 2,100,000 Common Shares were authorized, of which 268,052 Common Shares have been issued under the Plan. PRESIDENT’S LETTER Stock Exchange listings Glimcher realty Trust common stock is traded on the NYSE under the symbol “GrT.” GrT has two issues of preferred stock, both of which are also traded on the NYSE under the following symbols: The Series F Preferred Shares: “GrT.F” The Series G Preferred Shares: “GrT.G” PROXY STATEMENT QUArTEr ENDED March 31, 2006 June 30, 2006 September 30, 2006 December 31, 2006 March 31, 2005 June 30, 2005 September 30, 2005 December 31, 2005 hIGh $29.10 $28.36 $25.63 $27.72 $28.03 $29.00 $30.16 $26.70 loW $23.95 $23.88 $23.08 $24.20 $23.40 $23.45 $24.03 $21.74 DISTrIbUTIoNS PEr CoMMoN ShArE $0.4808 $0.4808 $0.4808 $0.4808 $0.4808 $0.4808 $0.4808 $0.4808 Governance Disclosures on May 31, 2006, our Chief Executive officer submitted to the NYSE a certificate certifying that he was not aware of any violations by GrT of the corporate governance listing standards of the NYSE. We have filed our Section 302 certifications from our Chief Executive officer and Chief Financial officer with the Securities and Exchange Commission and NYSE as exhibits to our Form 10-K, which is attached to and included within this Annual report. The information regarding (i) management’s discussion and analysis of financial condition results of operations, (ii) quantitative and qualitative disclosures about market risk, (iii) business segment information, and other selected financial data can be found in GrT’s Annual report on Form 10-K attached hereto. FORM 10-K Annual report on Form 10-K GrT’s Annual report on Form 10-K for the year ended December 31, 2006, is attached and is also available to shareholders without charge upon written request addressed to Investor relations at the address of our corporate offices stated on the last page of this report. Employees At February 22, 2007, GrT, together with its consolidated affiliates, had an aggregate of 1,150 employees, of which 550 were part-time. holders The number of holders of record of the Common Shares was 911 on February 22, 2007. Annual Meeting of Shareholders Glimcher realty Trust’s annual meeting of shareholders will be held on May 11, 2007, at 11:00 a.m. (ET) at The renaissance hotel, 50 North 3rd Street, Columbus, ohio 43215. CORPORATE INFORMATION Distributions Future distributions paid by GrT on the Common Shares will be at the discretion of the board of Trustees (the “board”) of GrT and will depend upon the actual cash flow of GrT, its financial condition, capital requirements, the annual distribution requirements under the rEIT provisions of the Internal revenue Code and other such factors as the trustees of GrT deem relevant. PRESIDENT’S LETTER ExECUTIVE oFFICErS AND TrUSTEES herbert Glimcher* (2) (8) Chairman of the board and Trustee Mark E. Yale (6) Executive Vice President, Chief Financial officer and Treasurer Michael P. Glimcher* (2) (6) President, Chief Executive officer and Trustee Kim A. rieck, Esq. (6) Senior Vice President, General Counsel and Secretary Marshall A. loeb (6) Executive Vice President, Chief operating officer Kenneth D. Cannon Senior Vice President, Development George A. Schmidt, Esq. (6) Executive Vice President, Chief Investment officer PROXY STATEMENT Thomas J. Drought, Jr. Senior Vice President, Director of leasing David M. Aronowitz* (1) (5) Executive Vice President, General Counsel, and Corporate Secretary of The Scotts Miracle-Gro Company (since 1998); Trustee since 2006. Niles C. overly* (1) (2) (3) (4) Chairman of The Frank Gates Companies (risk management) (since 2003) and Chief Executive officer (since 1983); General Counsel for The Frank Gates Companies (1979-1983); Tax Consultant with Arthur Andersen and Company (1977-1979); Partner of overly, Spiker, Chappano, and Wood (1983-1998); Trustee since 2004. Philip G. barach* Private investor; Chairman of the board of U.S. Shoe Corporation (1990-1993); Chairman, President and Chief Executive officer of U.S. Shoe Corporation (1966-1990); Trustee since 1994. FORM 10-K Alan r. Weiler* (2) Chairman of the board of Archer-Meek-Weiler Agency, Inc. (insurance) (since 1970); President of Archer-Meek-Weiler Agency, Inc. (1970-2002); Member of the board of Directors of Pro Century Corporation (since 2004); Trustee since 1994. Wayne S. Doran* (1) (2) (5) (7) Private investor; former Chief Executive officer and Chairman of the board of Ford Motor land Services Corporation (19702000) and Vice President of Ford Motor Company (1969); Vice President and General Manager of Del E. Webb Corporation (1963-1969); Trustee since 1999. William S. Williams* (3) (5) Chairman (since 1999) and Chief Executive officer (since 1992) of The W. W. Williams Company (equipment distribution); Trustee since 2004. howard Gross* (3) (5) Interim Chief Executive officer of Eddie bauer holdings, Inc. (2007); President and Chief Executive officer of hUb Distributing (1996-2003); President and Chief operating officer of Today’s Man (1995-1996); President and Chief Executive office of the limited Stores (1991-1994); President and Chief Executive officer of Victoria’s Secret (1983-1991); Member of the board of Directors of Eddie bauer holding, Inc. (since 2005); Trustee since 2004. CORPORATE INFORMATION * TrusTee (1) AudiT CommiTTee (2) exeCuTive CommiTTee (3) exeCuTive CompensATion CommiTTee (4) AudiT CommiTTee FinAnCiAl experT (5) nominATing And CorporATe governAnCe CommiTTee (6) disClosure CommiTTee (7) leAd independenT TrusTee (8) mr. glimCher Also serves As senior Advisor To The CompAny, A non-exeCuTive posiTion This annual report contains certain forward-looking statements. See “1A. risk Factors,” located in the Annual report on Form 10-K, with respect to those factors that might cause future events and actual results from the expected results discussed in the forward-looking statements. Common Share Performance The following table and graph compare the cumulative total shareholder return on the Common Shares for the period January 1, 1995, through December 31, 2006, with the cumulative total return on the Standard & Poor’s 500 Stock Index (“S&P 500”), the NArEIT Equity rEIT Total return Index (“NArEIT Index”),1 and the russell Index (“russell Index”) for the period commencing January 1, 1995, through December 31, 2006. Total return values for the S&P 500, the NArEIT Index, the russell Index, and the Common Shares were calculated based on cumulative total return assuming the investment of $100 in each of the S&P 500, the NArEIT Index, the russell Index, and in the Common Shares on January 1, 1995, and assuming reinvestment of dividends. The information set forth below is not necessarily indicative of future performance. GRT Total Return 12/31/1995 12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003 12/31/2004 12/31/2005 12/31/2006 $101.73 $143.65 $161.15 $124.33 $116.29 $129.52 $218.30 $228.18 $314.73 $420.40 $398.22 $470.50 NAREIT $118.92 $160.86 $193.45 $159.59 $152.22 $192.35 $219.15 $227.53 $312.04 $410.61 $444.65 $597.39 S&P 500 Index $139.23 $171.19 $228.32 $293.57 $355.30 $323.21 $284.79 $227.12 $292.28 $324.06 $339.37 $392.96 Russell Index $126.10 $146.90 $179.75 $175.17 $212.41 $205.99 $211.11 $172.35 $253.79 $300.29 $393.58 $465.88 PRESIDENT’S LETTER PROXY STATEMENT $600.00 GrT Total return NArEIT S&P 500 Index $525.00 $450.00 russell Index FORM 10-K $375.00 $300.00 $225.00 $150.00 $75.00 CORPORATE INFORMATION $0.00 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (1) The NArEIT Equity rEIT Total return Index (consisting of 197 companies with a total market cap of $330 billion) is maintained by NArEIT. The information provided shall not be deemed “soliciting material” or “filed” with the Securities & Exchange Commission or subject to the liabilities of §18 of the Securities Exchange Act of 1934, as amended, unless the Company specifically states otherwise. FORM 10-K PROXY STATEMENT PRESIDENT’S LETTER Corporate offices 150 East Gay Street Columbus, ohio 43215 614.621.9000 Website and E-Mail Website: www. glimcher.com E-mail: GrTinfo@ glimcher.com CORPORATE INFORMATION Transfer Agent and registrar Computershare Investor Services 2 North laSalle Po box A3504 Chicago, Il 60602 1.800.738.4931 Independent Accountants bDo Seidman, llP Chicago, Il Counsel bryan Cave llP New York, NY GLIMCHER PRESIDENT’S LETTER GLIMCHER REALTY TRUST 150 East Gay Street Columbus, Ohio 43215 March 30, 2007 Dear Shareholder: You are cordially invited to attend the 2007 Annual Meeting of Shareholders of Glimcher Realty Trust, which will be held on Friday, May 11, 2007, beginning at 11:00 A.M., local time, at The Renaissance Hotel, 50 North Third Street, Columbus, Ohio 43215, for the purposes stated in the attached Notice of Annual Meeting of Shareholders. Information about the Annual Meeting and the various matters on which the holders of common shares of beneficial interest will act is included in the Notice of Annual Meeting of Shareholders and Proxy Statement that follow. Also included is a Proxy Card and postage paid return envelope. It is important that your common shares be represented at the Annual Meeting. Whether or not you plan to attend, we hope that you will complete and return your Proxy Card in the enclosed envelope as promptly as possible. FORM 10-K PROXY STATEMENT Sincerely, Herbert Glimcher Chairman of the Board CORPORATE INFORMATION PRESIDENT’S LETTER Forward Looking Statements This Proxy Statement, together with other statements and information publicly disseminated by Glimcher Realty Trust, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results may differ from the events discussed in the forward-looking statements. Risks and other factors that might cause differences, some of which could be material, include, but are not limited to, economic and market conditions, employment litigation, competition, transaction delays, the failure of Glimcher Realty Trust to qualify as a real estate investment trust, loss of key personnel, the failure to achieve earnings/funds from operations targets or estimates, as well as other risks listed from time to time in our Form 10-K or other reports filed by Glimcher Realty Trust with the Securities and Exchange Commission. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION FORM 10-K PROXY STATEMENT GLIMCHER GLIMCHER REALTY TRUST NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held On May 11, 2007 The 2007 Annual Meeting of Shareholders (the “Annual Meeting”) of Glimcher Realty Trust, a Maryland real estate investment trust (the “Company”), will be held at The Renaissance Hotel, 50 North Third Street, Columbus, Ohio 43215, on Friday, May 11, 2007, beginning at 11:00 A.M., local time, for the following purposes: 1. To elect two Class I Trustees to serve until the 2010 Annual Meeting of Shareholders and until their successors are duly elected and qualified; 2. To elect one Class III Trustee to serve until the 2009 Annual Meeting of Shareholders and until his successor is duly elected and qualified; PROXY STATEMENT PRESIDENT’S LETTER 3. To approve the following matters with respect to the Glimcher Realty Trust 2004 Incentive Compensation Plan, as amended (the “2004 Plan”): (i) an increase in the number of the Company’s common shares of beneficial interest (“Common Shares”) reserved for issuance under the 2004 Plan by two million five hundred thousand (2,500,000) Common Shares to three million six hundred thousand (3,600,000) Common Shares (the “Reserved Common Shares”), (ii) an increase in the limitation under the 2004 Plan on the number of Reserved Common Shares available for grants of full value awards by six hundred thousand (600,000) Common Shares to one million (1,000,000) Common Shares, (iii) an increase in the limitations under the 2004 Plan on the number of Reserved Common Shares available for grants of awards of incentive options and non-qualified options each by two million five hundred thousand (2,500,000) Common Shares to three million six hundred thousand (3,600,000) Common Shares, and (iv) the addition of a dividend distribution performance measure (which includes, but is not limited to, growth in or maintenance of dividends on the Common Shares) as well as the re-approval of the other performance criteria previously approved by our shareholders that are currently set forth in the 2004 Plan; 4. To ratify the appointment of BDO Seidman, LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2007; and 5. To transact such other business as may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof. The Board of Trustees of the Company has fixed the close of business on March 9, 2007 as the record date for determining the holders of record of the Common Shares entitled to receive notice of and to vote at the Annual Meeting. SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. FORM 10-K CORPORATE INFORMATION YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY CARD WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. By Order of the Board of Trustees Kim A. Rieck Senior Vice President, General Counsel, & Secretary March 30, 2007 Columbus, Ohio GLIMCHER GLIMCHER REALTY TRUST PRESIDENT’S LETTER PROXY STATEMENT FOR 2007 ANNUAL MEETING OF SHAREHOLDERS Table of Contents Page I. II. Introduction & General Information About the Annual Meeting and Voting ................. 1 Proposals for Shareholder Consideration at the Annual Meeting.................................... 4 III. Information About Our Trustees, Trustee Nominees, & Executive Officers................... 13 • Biographies of Our Trustees & Trustee Nominees ..................................................... 13 PROXY STATEMENT • Biographies of Our Executive Officers....................................................................... 15 IV. Corporate Governance ..................................................................................................... 17 • Corporate Governance Policies & Procedures ............................................................ 17 • Trustee Independence.................................................................................................. 20 V. Our Board of Trustees, Its Committees, & Their Policies.............................................. 21 VI. Compensation of Our Executive Officers & Trustees .................................................... 25 FORM 10-K • Compensation Discussion and Analysis ..................................................................... 25 • Summary Compensation Table & Other Supporting Tables....................................... 32 • Potential Payments to Named Executives Upon Termination or Change in Control................................................................................................... 39 • Trustee Compensation................................................................................................. 44 • Certain Relationships & Related Party Transactions .................................................. 46 • Compensation Committee Report ............................................................................... 48 VII. Information About Security Ownership and Our Equity Compensation Plans .............. 49 CORPORATE INFORMATION • Security Ownership of Certain Beneficial Owners & Management ........................... 49 • Equity Compensation Plan Information...................................................................... 53 VIII. Audit Committee Statements........................................................................................... 54 IX. Independent Registered Public Accountants – Fees for Audit & Non-Audit Services ........................................................................................................ 55 X. General Information........................................................................................................ 56 XI. Appendix A..................................................................................................................... 58 GLIMCHER GLIMCHER REALTY TRUST 150 East Gay Street Columbus, Ohio 43215 PROXY STATEMENT Annual Meeting of Shareholders May 11, 2007 INTRODUCTION This Proxy Statement is furnished in connection with the solicitation by the Board of Trustees of Glimcher Realty Trust, a Maryland real estate investment trust, of proxies from the holders of its issued and outstanding common shares of beneficial interest, $0.01 par value per share (the “Common Shares” or “Common Stock”), to be exercised at the Annual Meeting of Shareholders to be held on Friday, May 11, 2007, and any adjournment(s) or postponement(s) of such meeting (the “Annual Meeting”), for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. From time to time throughout this Proxy Statement, Glimcher Realty Trust will be referred to as the “Company,” “we,” “us,” or “our company.” GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING Time and Place of the Annual Meeting The Annual Meeting will be held at The Renaissance Hotel, 50 North Third Street, Columbus, Ohio 43215 at 11:00 A.M., local time, on Friday, May 11, 2007. Proxy Recipients Holders of record of the Common Shares at the close of business on March 9, 2007 (the “Record Date”) are entitled to receive a Notice of Annual Meeting of Shareholders (the “Notice”), this Proxy Statement, Proxy Card, and a copy of our Annual Report to Shareholders (which includes our Annual Report on Form 10-K for the year ended December 31, 2006) (collectively, the “Proxy Materials”). We mailed the Proxy Materials to shareholders of record on or about March 30, 2007. As of the Record Date, the Company had 37,058,102 issued and outstanding Common Shares. Proxy Voting Individuals and entities holding the Common Shares at the close of business on the Record Date will be asked to consider and vote upon the following proposals (the “Proposals”): 1. To elect two Class I Trustees to serve until the 2010 Annual Meeting of Shareholders and until their successors are duly elected and qualified (“Proposal 1”); To elect one Class III Trustee to serve until the 2009 Annual Meeting of Shareholders and until his successor is duly elected and qualified (“Proposal 2”); To approve the following matters with respect to the Glimcher Realty Trust 2004 Incentive Compensation Plan, as amended (the “2004 Plan”): (i) an increase in the number of the Company’s common shares of beneficial interest (“Common Shares”) reserved for issuance under the 2004 Plan by two million five hundred thousand (2,500,000) Common Shares to three million six hundred thousand (3,600,000) Common Shares (the “Reserved Common Shares”), (ii) an increase in the limitation under the 2004 Plan on the number of Reserved Common Shares available for grants of full value awards by six hundred thousand (600,000) Common Shares to one million (1,000,000) Common Shares, (iii) an increase in the limitations under the 2004 Plan on the number of Reserved Common Shares available for grants of awards of incentive options and non-qualified options each by two million five hundred thousand (2,500,000) Common Shares to three PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K 2. CORPORATE INFORMATION 3. 1 million six hundred thousand (3,600,000) Common Shares, and (iv) the addition of a dividend distribution performance measure (which includes, but is not limited to, growth in or maintenance of dividends on the Common Shares), as well as the re-approval of the other performance criteria previously approved by our shareholders, currently set forth in the 2004 Plan, one or more of which shall be utilized in establishing specific targets to be attained as a condition to the vesting of cash or stock-based performance unit and performance share awards under the 2004 Plan so as to qualify the compensation attributable to those awards as performance-based compensation under Section 162(m) of the Internal Revenue Code (“Proposal 3”); 4. To ratify the appointment of BDO Seidman, LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2007 (“Proposal 4”); and To transact such other business as may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof. PRESIDENT’S LETTER 5. PROXY STATEMENT With respect to the election of trustees, each shareholder is entitled to one vote per Common Share for each nominee for trustee. On each of the other aforementioned proposals, each shareholder is entitled to one vote per Common Share owned by such holder. You should read this Proxy Statement to decide how you want to vote on each proposal and complete the enclosed Proxy Card. After you record your voting preferences on the Proxy Card, sign the Proxy Card and promptly mail it using the enclosed postage paid envelope to ensure that your Common Shares will be represented at the Annual Meeting. Conducting the Annual Meeting In order for us to properly conduct business at the Annual Meeting, a quorum must be present. Under our Amended and Restated Bylaws, as amended (the “Bylaws”), the presence in person or by proxy of a majority of the outstanding Common Shares as of the Record Date will constitute a quorum. Four proposals are presented in this Proxy Statement on which shareholders may vote. The first proposal concerns the election of two Class I Trustees to our Board of Trustees. The second proposal concerns the election of one Class III Trustee to our Board of Trustees. In order for a trustee nominee to be elected, the nominee must receive a plurality of all the votes cast as it pertains to the trustee nominee’s election. A properly signed proxy marked “WITHHOLD” with respect to the election of one or more trustees will not be voted for the trustee(s) so indicated, but will be counted to determine whether there is a quorum. The third proposal concerns the approval of certain matters with respect to the 2004 Plan. The affirmative vote by holders of at least a majority of the votes cast at the Annual Meeting at which a quorum is present is required to approve the matters with respect to the 2004 Plan, provided that the total vote cast on the matters represents more than 50% of all Common Shares entitled to vote thereon. The fourth proposal concerns the ratification of BDO Seidman, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2007. The affirmative vote by holders of at least a majority of the votes cast at the Annual Meeting at which a quorum is present is required to ratify the appointment of BDO Seidman, LLP as our independent registered public accounting firm. The Common Shares represented by all properly executed proxies returned to us will be voted at the Annual Meeting as indicated or, if no instruction is given, in favor of all Proposals. With respect to Common Shares held in street name, brokerage firms have the authority under the New York Stock Exchange (“NYSE”) rules to vote “FOR” Proposals 1, 2, and 4 in situations where their clients do not provide voting instructions. Shareholders have no dissenters’ rights of appraisal with respect to any of the Proposals. As to any other business which may properly come before the Annual Meeting, all properly executed proxies will be voted by the persons named therein in accordance with their discretion. The Company does not presently intend to bring any other business before the Annual Meeting. Revoking Your Proxy Vote You may change your vote or revoke your proxy at any time before your proxy is exercised at the Annual Meeting in either of the following ways. One way is for you to file, with the Secretary of the Company, a duly signed revocation or another Proxy Card bearing a later date than the initial proxy submitted. You may also change your proxy vote by attending the Annual Meeting in person and voting in CORPORATE INFORMATION FORM 10-K 2 person; however, mere attendance at the Annual Meeting will not serve to revoke a proxy unless you specifically request such a revocation. Abstentions & Broker Non-Votes Abstentions occur when a shareholder abstains from voting as to a particular matter. Broker non-votes occur when a broker, bank, or other nominee holding Common Shares for a beneficial owner does not vote on a particular proposal because the banker, broker, or other nominee does not have discretionary voting power with respect to the proposal and has not received voting instructions from the beneficial owner. With respect to Proposals 1, 2, and 4, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of a vote. For purposes of Proposal 3, abstentions will be treated as votes cast and will have the same effect as a vote “AGAINST” the matter and broker non-votes will not be considered as votes cast and will have no effect on the outcome, unless they result in a failure to obtain total votes cast of more than 50% of the Common Shares entitled to vote. With respect to all Proposals, abstentions and broker non-votes will be considered present for the purposes of determining a quorum. Types of Shareholders & Specifying Your Vote If your Common Shares are registered directly in your name with Computershare Investor Services, LLC, the Company’s transfer agent, you are considered the shareholder of record with respect to those Common Shares. If your Common Shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of those Common Shares, and your Common Shares are held in “street name.” If you are a shareholder through your participation in the Company’s Distribution Reinvestment and Share Purchase Plan (the “Purchase Plan”) then you should include on your Proxy Card the number of Common Shares registered in your name under the Purchase Plan. With respect to shareholders of record who fail to specify on their Proxy Card how to vote their Common Shares, we will vote them: i) FOR each of the nominees for Class I Trustee (Proposal 1), ii) FOR the nominee for Class III Trustee (Proposal 2), iii) FOR the matters with respect to the 2004 Plan (Proposal 3), and iv) FOR ratifying the appointment of BDO Seidman, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2007 (Proposal 4). PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED AND THE DELIVERY OF THIS PROXY STATEMENT SHALL, UNDER NO CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION 3 PROPOSALS FOR SHAREHOLDER CONSIDERATION AT THE ANNUAL MEETING PRESIDENT’S LETTER The following proposals will be presented at the Annual Meeting and voted on by holders of the Company’s Common Shares at the close of business on the Record Date and represented at the Annual Meeting in person or by proxy. Proposal 1: Election of Class I Trustees The Company's Board of Trustees currently consists of nine members who are classified into three equal separate classes denoted as Class I Trustees, Class II Trustees, and Class III Trustees. All three of the Class I Trustees and one of the Class III Trustees have terms that expire at the Annual Meeting. The Class II Trustees have terms that will expire at the 2008 Annual Meeting of Shareholders and the other two Class III Trustees have terms that will expire at the 2009 Annual Meeting of Shareholders. Only two Class I Trustees have been nominated for re-election at the Annual Meeting. As a result, after the election of trustees at the Annual Meeting, there will be two Class I Trustees, three Class II Trustees, and three Class III Trustees. With respect to the election of Class I Trustees, pursuant to the Company's Amended and Restated Declaration of Trust, as amended (the “Declaration of Trust”), at each annual meeting, the successors to the class of trustees whose term expires at such meeting shall be elected to hold office for a term expiring at the annual meeting of the Company’s shareholders held in the third year following the year of their election and until their successors are duly elected and qualified. Accordingly, at the Annual Meeting, each of the current Class I Trustees who have been nominated for re-election to the Board of Trustees who is elected, will hold office for a term of three years until the Annual Meeting of Shareholders to be held in 2010 and until their respective successors are duly elected and qualified. The Nominating and Corporate Governance Committee has recommended to the Board of Trustees that incumbent Class I Trustees, Messrs. Niles C. Overly and William S. Williams, be nominated by the Board of Trustees for re-election as Class I Trustees. The Board of Trustees has so nominated Messrs. Niles C. Overly and William S. Williams for re-election as Class I Trustees. Pursuant to the age limitations in our Corporate Governance Guidelines, Mr. Philip G. Barach, an incumbent Class I Trustee, was not nominated for re-election as a Class I Trustee and will retire from his service on the Board of Trustees when his term expires at the Annual Meeting. Proxies cannot be voted for a greater number of persons than the number of nominees named in Proposal 1 herein. The biographies of the individuals nominated for election as Class I Trustees are listed in the section of this Proxy Statement entitled “Information About Our Trustees, Trustee Nominees, & Executive Officers.” THE BOARD OF TRUSTEES RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF MESSRS. NILES C. OVERLY AND WILLIAM S. WILLIAMS TO SERVE UNTIL THE 2010 ANNUAL MEETING OF SHAREHOLDERS AND UNTIL THEIR SUCCESSORS ARE DULY ELECTED AND QUALIFIED. Proposal 2: Election of a Class III Trustee Currently there are three members of the Board of Trustees denoted as Class III Trustees. One of those members, Mr. David M. Aronowitz, was elected on May 5, 2006 by the Board of Trustees, upon the recommendation of the Nominating and Corporate Governance Committee, to serve as a Class III Trustee for a one year term. Mr. Aronowitz’s election filled a pre-existing vacancy on the Board of Trustees. Under the Bylaws, any vacancy on the Board of Trustees may be filled by a majority vote of the remaining members of the Board of Trustees. Additionally, the Bylaws permit any person elected by the Board of Trustees to fill a vacancy to hold office for the unexpired term of the class of trustees in which such person was elected. However, as a matter of good corporate practice, the Board of Trustees, upon the recommendation of the Nominating and Corporate Governance Committee, decided to only elect Mr. Aronowitz to a one-year term and to nominate him for re-election by the holders of Common Shares at the Annual Meeting. Accordingly, if elected by the shareholders, Mr. Aronowitz will hold office for a term of two years until the 2009 Annual Meeting of Shareholders and until his successor is duly elected and qualified. Proxies cannot be voted for a greater number of persons than the number of nominees named in Proposal 2 herein. The biography of Mr. Aronowitz is set forth in the section of this Proxy Statement entitled “Information About Our Trustees, Trustee Nominees, & Executive Officers.” CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 4 THE BOARD OF TRUSTEES RECOMMENDS A VOTE “FOR” THE ELECTION OF MR. DAVID M. ARONOWITZ TO SERVE UNTIL THE 2009 ANNUAL MEETING OF SHAREHOLDERS AND UNTIL HIS SUCCESSOR IS DULY ELECTED AND QUALIFIED. There are currently two vacancies on the Board of Trustees. After the Annual Meeting, there will be three vacancies on the Board of Trustees as a result of Mr. Barach not being nominated for re-election as a Class I Trustee. At this time, the Nominating and Corporate Governance Committee has not identified any candidates for trustee that it deems satisfactory to recommend as nominees for election to the Board of Trustees to fill the aforementioned vacancies. The Nominating and Corporate Governance Committee continues to search for qualified candidates for trustee who satisfy the Company’s governance standards and the requirements of the NYSE. Each of the aforementioned nominees for election as trustee has consented to being named in this Proxy Statement and to continue to serve as a trustee, as the case may be, if elected. Proposal 3: Amendments to the 2004 Plan PRESIDENT’S LETTER PROXY STATEMENT The 2004 Plan was adopted by our Executive Compensation Committee and Board of Trustees. Our shareholders approved the 2004 Plan on May 7, 2004. The Executive Compensation Committee, as administrator of the 2004 Plan, and the Board of Trustees have approved and adopted certain matters relating to the 2004 Plan which are set forth in an amended and restated 2004 Plan (the “Amended Plan”). Four matters relating to the 2004 Plan that have been approved and adopted require shareholder approval and are as follows (the “Amendments”): 1. The maximum number of Common Shares reserved for issuance under the 2004 Plan will increase from one million one hundred thousand (1,100,000) Common Shares to three million six hundred thousand (3,600,000) Common Shares; 2. The limitations under the 2004 Plan on the number of Reserved Common Shares available for grants of full value awards will increase by six hundred thousand (600,000) Common Shares to one million (1,000,000) Common Shares; 3. The limitations under the 2004 Plan on the number of Reserved Common Shares available for grants of awards of each of incentive options and non-qualified options will increase by two million five hundred thousand (2,500,000) Common Shares to three million six hundred thousand (3,600,000) Common Shares; and 4. The approval of a dividend distribution performance measure (which includes, but is not limited to, growth in or maintenance of dividends on the Common Shares), as well as the re-approval of the other performance criteria previously approved by our shareholders, currently set forth in the 2004 Plan, one or more of which shall be utilized in establishing specific targets to be attained as a condition to the vesting of cash or stock-based performance unit and performance share awards under the 2004 Plan so as to qualify the compensation attributable to those awards as performance-based compensation under Section 162(m) of the Internal Revenue Code, as amended (the “Code”), which would result in the Company being able to deduct certain compensation expenses in excess of $1,000,000. For additional information on Section 162(m) of the Code, see “Material Federal Income Tax Considerations -- Million Dollar Deduction Limit” below. The Board of Trustees recommends that the shareholders adopt and approve the Amendments and their incorporation into the 2004 Plan. Shareholder approval of the Amendments, among other things, is intended to comply with applicable securities law and NYSE requirements. The Executive Compensation Committee and the Board of Trustees adopted the amendment to increase the number of Common Shares under the 2004 Plan because each believes that: • additional Common Shares are necessary to attract new employees and executives; FORM 10-K CORPORATE INFORMATION 5 PRESIDENT’S LETTER • additional Common Shares are needed to further the goal of retaining and motivating existing personnel; and • the issuance of options and stock awards is integral to the Company’s compensation objectives and programs for trustees, executive officers, employees, and third party service providers. The performance criteria which are utilized in establishing specific targets to be attained as a condition of vesting of cash or stock-based performance unit or performance share awards under the 2004 Plan were initially approved by shareholders on May 7, 2004. For purposes of Section 162(m) of the Code, such approval remains valid for five years thereafter. The Executive Compensation Committee and the Board of Trustees have proposed that the shareholders re-approve the performance criteria by voting for this proposal so that the performance criteria summarized in “Performance Unit and Performance Share Awards” below will remain valid for five years after receipt of such shareholder approval. A copy of the Amended Plan described in this Proposal is attached hereto as Appendix A. The discussion of the Amended Plan that follows is intended to provide only a summary of the principal features of the Amended Plan and is in all respects qualified by, and subject to, the actual terms and provisions of the attached Amended Plan. The 2004 Plan and Amended Plan permit the grant of options, share appreciation rights (“SARs”), restricted shares, restricted share units, performance awards, annual incentive awards, cash-based awards, and other share-based awards. Individuals eligible to receive awards and grants under the 2004 Plan and Amended Plan include employees, officers, trustees, consultants, agents, advisors, and other third party service providers of the Company and its subsidiaries. As of the Record Date, there are nine trustees, seven senior executive officers and approximately 138 employees (other than senior executive officers) who are eligible to receive awards under the 2004 Plan. As of the Record Date, the aggregate maximum number of Common Shares reserved for issuance upon the exercise of stock options or other awards granted under the 2004 Plan was 1,100,000, of which 137,599 Common Shares remain available for future grant as of the Record Date. The Company also has a 1997 Incentive Plan (the “1997 Plan”). The 1997 Plan has an aggregate maximum number of 3,000,000 Common Shares reserved for issuance upon the exercise of stock options or other awards, of which 152,355 Common Shares remained available for future grant as of the Record Date. Pursuant to its terms, the 1997 Plan will terminate on December 11, 2007. Description of the Amended Plan The purpose of the Amended Plan is to provide a means whereby employees, trustees, and third party service providers develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of the Amended Plan is to provide a means through which the Company may attract able persons to become employees or serve as trustees or third party service providers of the Company and to provide a means whereby those individuals, upon whom the responsibilities of the successful administration and management of the Company are of importance, can acquire and maintain Common Share ownership, thereby strengthening their concern for the welfare of the Company. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT The Amended Plan will terminate on May 6, 2014, unless sooner terminated. Amended Plan and Participant Share Limits If this amendment is approved, the maximum number of Common Shares issuable under the Amended Plan will be increased from 1,100,000 to 3,600,000. Of the Common Shares reserved for issuance under the Amended Plan, no more than 1,000,000 of the reserved Common Shares may be issued as full value awards. Full value awards are awards other than options or SARs which are settled by the issuance of Common Shares such as restricted shares or restricted share units. Common Shares are counted against the authorization only to the extent they are actually issued. However, the full market value of SARs granted that are to be settled by the issuance of Common Shares will be counted against the number of Common Shares available for award under the Amended Plan, 6 regardless of the number of Common Shares actually issued upon the settlement of such SARs. Common Shares that terminate by expiration, forfeiture, cancellation, or otherwise without issuance of such shares, are settled in cash in lieu of Common Shares, or exchanged for awards not involving Common Shares, shall again be available for grant. If the option price or tax withholding requirements of any award are satisfied by tendering Common Shares to the Company, then such Common Shares tendered to the Company shall no longer be eligible to be returned as available Common Shares under the Amended Plan. The Amended Plan also imposes annual per-participant award limits. The maximum number of Common Shares for which options may be granted to any person in any calendar year is 300,000. The maximum number of Common Shares subject to SARs granted to any person in any calendar year is 300,000. The maximum aggregate grant to any person in any calendar year of restricted shares or restricted share units is 100,000 Common Shares. The maximum aggregate grant to any person in any calendar year of performance units or performance shares is the value of 100,000 Common Shares determined as of the earlier of the date of vesting or payout. The maximum aggregate grant to any person in any calendar year of cash-based awards may not exceed $3,000,000. The maximum aggregate grant to any person in any calendar year of other share-based awards is 100,000 Common Shares. The number and kind of Common Shares that may be issued, the number and kind of Common Shares subject to outstanding awards, the option price or grant price applicable to outstanding awards, the annual per-participant award limits, and other value determinations are subject to adjustment by the administration committee for the Amended Plan to reflect share dividends, share splits, reverse share splits and other corporate events or transactions, including without limitation, distributions of Common Shares or property other than normal cash dividends. The administration committee for the Amended Plan may also make adjustments to reflect unusual or nonrecurring events such as mergers, consolidations, spin-offs, and other corporate reorganizations. Administration The Amended Plan may be administered by the Executive Compensation Committee, any subcommittee thereof, or a committee consisting of two or more independent trustees (the “Committee”). This Committee has the discretionary power to interpret the terms and intent of the Amended Plan and any Amended Plan-related documentation, to determine eligibility for awards and the terms and conditions of awards and to adopt rules, regulations, forms, instruments and guidelines. Determinations of the Committee made under the Amended Plan are final and binding. At the current time, the Executive Compensation Committee of the Board of Trustees is serving as the administration committee of the 2004 Plan. Eligibility Employees, non-employee trustees, and third party service providers of the Company and its subsidiaries who are selected by the Committee are eligible to participate in the Amended Plan. The Executive Compensation Committee approves grants of awards to senior executive officers of the Company under the Amended Plan. Options The Committee may grant both incentive options (“ISOs”) and nonqualified options (“NQSOs”) under the Amended Plan. Eligibility for ISOs is limited to employees of the Company and its parent or subsidiary corporations. The exercise price for options cannot be less than the fair market value of the Common Shares underlying such options on the date of grant; however, the exercise price can be established at a premium to the fair market value of the Common Shares on the date of grant or can be indexed to the fair market value of the Common Shares on the date of grant (provided that the exercise price cannot be less than 100% of the fair market value of the Common Shares on the date of grant (110% with respect to ISOs granted to a 10% shareholder)). The latest expiration date cannot be later then the tenth anniversary of the date of grant (for an ISO, the fifth anniversary of the date of grant if the recipient is a 10% shareholder). Fair market value under the Amended Plan shall be the closing market price of a Common Share as reported on the NYSE or other established stock exchange on the date of the grant, or if Common Shares are not traded on such applicable date, the closing market price on the next day following such grant date on which Common Shares are traded. The exercise price may be paid with cash or its equivalent, with previously acquired Common Shares PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 7 PRESIDENT’S LETTER (in certain circumstances, that have been held at least six months), or by other means approved by the Committee, including by means of a broker-assisted cashless exercise. Share Appreciation Rights The Committee may grant SARs under the Amended Plan either alone or in tandem with options. The grant price of a SAR cannot be less than the fair market value of the Common Shares on the date of grant. SARs can also be granted with a grant price that is greater than the fair market value of the Common Shares on the date of grant or that is indexed to the fair market value of the Common Shares on the date of grant (provided that the grant price of such SAR cannot be less than the fair market value of the Common Shares on the date of grant). The grant price of a SAR granted in tandem with an option will be the same as the option price of the option. SARs cannot be exercised later then the tenth anniversary of the date of grant. SARs granted in tandem with ISOs are subject to special restrictions. Freestanding SARs may be exercised on such terms as the Committee determines and tandem SARs may be exercised by relinquishing the related portion of the tandem option. Upon exercise of a SAR, the holder will receive from the Company cash, Common Shares, or a combination, as determined by the Committee, equal in value to the difference between the fair market value of the Common Shares subject to the SAR, determined as described above, and the grant price. Restricted Shares and Restricted Share Units The Committee may award restricted shares and restricted share units. Restricted share awards consist of Common Shares that are transferred to the participant subject to restrictions that may result in forfeiture if specified conditions are not satisfied. Restricted share unit awards result in the transfer of Common Shares to the participant only after specified conditions are satisfied. A holder of restricted shares is generally treated as a current shareholder (subject to the restrictions), whereas the holder of a restricted share unit award is treated as a shareholder with respect to the award only when the Common Shares are delivered in the future. The Committee will determine the restrictions and conditions applicable to each award of restricted shares or restricted share units. PROXY STATEMENT FORM 10-K Performance Unit and Performance Share Awards Performance unit and performance share awards may be granted under the Amended Plan. Performance unit awards will have an initial value that is determined by the Committee. Performance shares will have an initial value that is equal to the fair market value of the Common Shares on the date of grant. Such awards will be earned only if performance goals over performance periods established by or under the direction of the Committee are met. The performance goals may vary from participant to participant, group to group, and period to period. The performance goals for performance unit and performance share awards that are intended to constitute “qualified performance-based compensation” will be based upon one or more of the following performance criteria: • Net earnings or net income (before or after taxes); • Funds From Operations (FFO); CORPORATE INFORMATION • Occupancy rates; • Earnings per share; • Net sales growth; • Net operating profit; • Return measures (including, but not limited to, return on assets, capital, invested capital, equity or sales); 8 • Cash flow (including, but not limited to, operating cash flow, free cash flow and cash flow return on equity); PRESIDENT’S LETTER • Earnings before or after taxes, interest, depreciation and/or amortization; • Gross or operating margins; • Productivity ratios; • Share price (including, but not limited to, growth measures and total shareholder return); and • Dividend distributions (including, but not limited to, growth in or maintenance of dividends on the Common Shares). The Committee will determine whether the performance targets or goals that have been chosen for a particular performance award have been met and may provide in an award that any evaluation of performance may include or exclude any of the following that are objectively determinable and that occur during the performance period to which the award is subject: asset write-downs, litigation, claims, judgments or settlements; the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reporting results; any reorganization and restructuring programs; extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30, as amended or supplemented, and/or in management’s discussion of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year; acquisitions, divestitures, joint ventures or alliances; and foreign exchange gains, and losses. Awards that are designed to qualify as performance-based compensation may not be adjusted upward. However, the Committee has the discretion to adjust these awards downward. In addition, the Committee has the discretion to make awards that do not qualify as performance-based compensation. Awards may be paid in the form of cash, Common Shares, or in any combination, as determined by the Committee. PROXY STATEMENT FORM 10-K Cash-Based Awards The Committee may grant cash-based awards under the Amended Plan that specify the amount of cash to which the award pertains, the conditions under which the award will be vested and exercisable or payable and such other conditions as the Committee may determine that are not inconsistent with the terms of the Amended Plan. Although based on a specified dollar amount, cash-based awards may be paid, in the Committee’s discretion, either in cash or by the delivery of Common Shares. Other Share-Based Awards The Committee may grant equity-based or equity-related awards, referred to as “other share-based awards,” other than options, SARs, restricted shares, restricted share units or performance shares. The terms and conditions of each other share-based award shall be determined by the Committee. Payment under any other share-based awards will be made in Common Shares or cash, as determined by the Committee. CORPORATE INFORMATION Dividend Equivalents The Committee may provide for the payment of dividend equivalents with respect to any Common Shares subject to an award, other than an award of options or SARs, which have not actually been issued under the award. Deferrals The Committee may require or permit a participant to defer the receipt of cash or Common Shares pursuant to any awards under the Amended Plan. 9 Termination of Employment PRESIDENT’S LETTER The Committee will determine how each award will be treated following termination of the holder’s employment with, or service for, the Company, including the extent to which unvested portions of the award will be forfeited and the extent to which options, SARs or other awards requiring exercise will remain exercisable. Additional Provisions Neither ISOs nor, except as the Committee otherwise expressly determines, other awards may be transferred other than by will or by the laws of descent and distribution. During a recipient’s lifetime, an ISO and, except as the Committee may determine, other non-transferable awards requiring exercise, may be exercised only by the recipient. Treatment of Awards Upon a Change of Control and Related Transactions PROXY STATEMENT One or more awards may be subject to the terms and conditions set forth in a written agreement between the Company and a participant providing for different terms or provisions with respect to such awards upon a “Change of Control” of the Company (as that term may be defined in such written agreement); provided, that such written agreement may not increase the maximum amount of such awards. Amendment of Awards or Amended Plan and Adjustment of Awards The Committee may at any time alter, amend, modify, suspend or terminate the Amended Plan or any outstanding award in whole or in part, except that no amendment of the Amended Plan will be made without shareholder approval if shareholder approval is required by applicable law or stock exchange regulations. No amendment to an award previously granted may adversely affect the rights of any participant to whom such award was granted without such participant’s consent, unless specifically provided for in the Amended Plan. In the event of any corporate event or transaction (including, but not limited to, a change in the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, stock dividend, stock split, reverse stock split, spin-off, or other distribution of stock or property of the Company, the Committee, in order to prevent dilution or enlargement of participants’ rights under the Amended Plan, shall substitute or adjust, as applicable, the number and kind of Common Shares that may be issued under the Amended Plan or under particular forms of awards issuable thereunder, as well as the number and kind of Common Shares subject to outstanding awards, the option exercise price or grant price applicable to outstanding awards, the annual award limits and other value determinations applicable to outstanding awards under the Amended Plan. The Committee shall also make appropriate adjustments in the terms of any awards under the Amended Plan to reflect such changes or distributions and to modify any other terms of outstanding awards, including modifications of performance goals and changes in the length of performance periods. Awards for Non-U.S. Employees To comply with the laws in other countries in which the Company or its subsidiaries operate or may operate or have employees, trustees, directors, or third-party service providers, the Committee may establish, among other things, subplans under the Amended Plan and modify the terms of the awards made to such employees, trustees, directors, or third-party service providers. Material Federal Income Tax Considerations The following is a brief summary of the principal federal income tax consequences of awards under the Amended Plan. The summary is based upon current federal income tax laws and interpretations thereof, all of which are subject to change at any time, possibly with retroactive effect. The summary is not intended to be exhaustive and, among other things, does not describe state, local or foreign tax consequences. CORPORATE INFORMATION FORM 10-K 10 i. Incentive Options PRESIDENT’S LETTER An optionee does not generally recognize taxable income upon the grant or upon the exercise of an ISO. However, the exercise of an ISO may in some cases trigger liability for the alternative minimum tax. Upon the sale of ISO shares, the optionee recognizes income in an amount equal to the difference, if any, between the exercise price of the ISO and the fair market value of the underlying Common Shares on the date of sale. The income is taxed at the long-term capital gains rate if the optionee has not disposed of the Common Shares within two years after the date of the grant of the ISO and has held the Common Shares for at least one year after the date of exercise, and the Company is not entitled to a federal income tax deduction. The holding period requirements are waived when an optionee dies. If an optionee sells ISO shares before having held them for at least one year after the date of exercise and two years after the date of grant (a “disqualifying disposition”), the optionee recognizes ordinary income to the extent of the lesser of: (i) the gain realized upon the sale or (ii) the difference between the exercise price and the fair market value of the Common Shares on the date of exercise. Any additional gain is treated as long-term or short-term capital gain depending upon how long the optionee has held the Common Shares underlying the ISO prior to disposition. In the year of a disqualifying disposition, the Company receives a federal income tax deduction in an amount equal to the ordinary income that the optionee recognizes as a result of the disqualifying disposition. ii. Nonqualified Options In general, an optionee does not recognize taxable income upon the grant of an NQSO. Upon the exercise of such an option, the optionee recognizes ordinary income to the extent the fair market value of the Common Shares received upon exercise of the NQSO on the date of exercise exceeds the exercise price. The Company receives an income tax deduction in an amount equal to the ordinary income that the optionee recognizes upon the exercise of the option. iii. Restricted Shares PROXY STATEMENT FORM 10-K A participant who receives an award of restricted shares does not generally recognize taxable income at the time of the award. Instead, unless an election is made as described in the next paragraph, the participant recognizes ordinary income in the first taxable year in which his or her interest in the Common Shares becomes either: (i) freely transferable or (ii) no longer subject to substantial risk of forfeiture. The amount of taxable income is equal to the fair market value of the Common Shares less the cash, if any, paid for the Common Shares. A participant may elect to recognize income at the time he or she receives restricted shares in an amount equal to the fair market value of the restricted shares (less any cash paid for the Common Shares) on the date of the award. Any such election must be filed with the Internal Revenue Service within 30 days of the date of grant. Future appreciation on the Common Shares will be taxed as capital gains when the Common Shares are sold. However, if after making such an election, the Common Shares are forfeited, the participant will be unable to claim any loss deduction. CORPORATE INFORMATION The Company receives a compensation expense deduction in an amount equal to the ordinary income recognized by the participant in the taxable year in which restrictions lapse (or in the taxable year of the award if, at that time, the participant had filed a timely election to accelerate recognition of income). iv. Other Awards In the case of an exercise of a SAR or an award of restricted share units, performance shares, performance units, share awards or incentive awards, the participant would generally recognize ordinary income in an amount equal to any cash received and the fair market value of any Common Shares received on the date of payment. In that taxable year, the Company would receive a federal income tax deduction in an amount equal to the ordinary income that the participant has recognized. 11 v. Million Dollar Deduction Limit PRESIDENT’S LETTER Pursuant to Section 162(m) of the Code, the Company may not deduct compensation of more than $1,000,000 that is paid to an individual who, on the last day of the taxable year, is either the Company’s chief executive officer or is among one of the four other most highly-compensated officers for that taxable year as reported in the Company's proxy statement (a “Covered Employee”). The limitation on deductions does not apply to certain types of compensation, including qualified performance-based compensation. It is intended that awards under the Amended Plan made to Covered Employees in the form of options, performance-based restricted shares, performance shares, performance units, SARs and cash payments under annual incentive awards will constitute qualified performance-based compensation and, as such, will be exempt from the $1,000,000 limitation on deductible compensation, but no assurance can be made in this regard. vi Withholding Taxes Awards made to participants under the Amended Plan may be subject to federal, state, and local income tax and employment tax withholding obligations and the Company will comply with any requirements to withhold such taxes. THE BOARD OF TRUSTEES RECOMMENDS A VOTE “FOR” THE MATTERS RELATING TO THE GLIMCHER REALTY TRUST 2004 INCENTIVE COMPENSATION PLAN. Proposal 4: Ratification of the Appointment of Our Independent Registered Public Accounting Firm The Audit Committee of the Board of Trustees has appointed BDO Seidman, LLP (“BDO”) as the Company’s independent registered public accounting firm to audit the financial statements of the Company for the fiscal year ending December 31, 2007. A proposal to ratify this appointment shall be presented to the holders of Common Shares at the Annual Meeting. Although ratification is not required under the Bylaws or otherwise, the Board of Trustees is submitting the appointment of BDO to our shareholders for ratification as a matter of good corporate practice. If this proposal is not approved at the Annual Meeting then the Audit Committee may reconsider its appointment. Regardless of the outcome of this vote, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its shareholders. A summary of the aggregate fees billed by BDO for various audit services and non-audit services that it provided to the Company for the fiscal years ended December 31, 2005 and December 31, 2006, respectively, are provided in the section of this Proxy Statement entitled “Independent Registered Public Accountants – Fees For Audit & Non-Audit Services.” THE BOARD OF TRUSTEES RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT EXCEPT WHERE OTHERWISE INSTRUCTED, PROXIES SOLICITED BY THIS PROXY STATEMENT WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES OF THE BOARD OF TRUSTEES LISTED ABOVE, FOR THE MATTERS RELATING TO THE GLIMCHER REALTY TRUST 2004 INCENTIVE COMPENSATION PLAN, AND FOR THE RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007. 12 INFORMATION ABOUT OUR TRUSTEES, TRUSTEE NOMINEES, & EXECUTIVE OFFICERS The following information is provided with respect to current members of the Board of Trustees whose terms do not expire at the Annual Meeting, nominees for election to the Board of Trustees, and executive officers of the Company. Executive officers are elected by and serve at the discretion of the Board of Trustees. The information provided has been furnished to the Company by the respective individuals listed below and is current as of the Record Date. Other than Michael P. Glimcher and Herbert Glimcher, who is the father of Michael P. Glimcher, none of the trustees, trustee nominees, or executive officers of the Company are related to each other. Biographies of Our Trustees & Trustee Nominees Set forth below is biographical information concerning the members of the Board of Trustees whose terms do not expire at the Annual Meeting. PRESIDENT’S LETTER PROXY STATEMENT Herbert Glimcher, 78, has been a trustee and Chairman of the Company since its inception in September 1993 and served as Chief Executive Officer of the Company from May 1997 until his resignation as Chief Executive Officer in January 2005. He served as President of the Company from March 1998 until the appointment of Michael P. Glimcher as President in December 1999. Mr. Glimcher also serves as Senior Advisor to the Company and has served in that capacity since February 1, 2005. He has served as Chairman of the Board of Directors of The Glimcher Company (“TGC”) since its inception in 1959. Mr. Glimcher is a nationally recognized innovator in the field of shopping center development, having been instrumental in the management, acquisition, and development of over 100 shopping centers during a real estate career spanning over 40 years. Mr. Glimcher is a member of the Board of Trustees of Mount Carmel Health System, Inc., a member of the Board of Directors of The Ohio State University Foundation, and a member of the Board of Trustees of the Columbus Jewish Foundation. Mr. Glimcher is a member of the International Council of Shopping Centers (“ICSC”) and the National Association of Real Estate Investment Trusts (“NAREIT”). Mr. Glimcher serves as Chairman of the Executive Committee of the Board of Trustees. Mr. Glimcher is a Class III Trustee. Michael P. Glimcher, 39, is currently the President and Chief Executive Officer of the Company. He has served as a trustee of the Company since June 1997. He was appointed President of the Company in December 1999 and elected Chief Executive Officer of the Company in January 2005. Prior to holding such positions, he served as the Company’s Director of Leasing Administration from 1993 to April 1995, the Company’s Vice President of Leasing from April 1995 to September 1996, and Senior Vice President of Leasing from September 1996 to May 1998. He served as Senior Vice President of Leasing and Development of the Company from May 1998 to March 1999. He was elected Executive Vice President of the Company in March 1999 and served in that position until appointed President of the Company. Mr. Glimcher served as the Director of Leasing Administration of TGC from 1991 to 1993. Mr. Glimcher is active in several charitable and community organizations. He is also a member of ICSC and NAREIT. Mr. Glimcher serves on the Board of Trustees for ICSC, the Arizona State University Foundation, and the United Way of Central Ohio. Mr. Glimcher is a member of the Executive Committee of the Board of Trustees as well as the Company’s Disclosure Committee. Mr. Glimcher is a Class II Trustee. Wayne S. Doran, 70, has been a trustee of the Company since October 1999. He retired in the fall of 2000 as a Vice President of Ford Motor Company and Chairman of the Board of Ford Motor Land Services Corporation (“Ford Land”), a wholly owned real estate subsidiary of Ford Motor Company. Mr. Doran joined Ford Motor Company in 1969 and became Chief Executive Officer of Ford Land when it was formed in 1970. Before joining Ford Motor Company, Mr. Doran served as Vice President and General Manager of the land development division of Del E. Webb Corporation, Chicago, from 1963 to 1969. He is a trustee of the Urban Land Institute, Chairman of the Executive Committee of the Metropolitan Realty Corporation, Chairman of the Detroit Metropolitan Wayne County Airport Commission, and a trustee of the National Realty Committee. He is a director of the Arizona State University Foundation, Arizona State University Research Park, The Drachman Institute, and the PGA TOUR Golf Course Properties. He is a member of the Board of Governors of Berry College, Rome, Georgia, and sits on the executive board of the Detroit Area Council of the Boy Scouts of America. He also is a director of the Henry Ford Health System. Mr. Doran is the Chairman of the Nominating and Corporate Governance Committee and serves as the lead trustee among FORM 10-K CORPORATE INFORMATION 13 PRESIDENT’S LETTER the independent members of the Board of Trustees. He also serves on the Audit Committee and Executive Committee of the Board of Trustees. Mr. Doran is a Class II Trustee. Alan R. Weiler, 73, has been a trustee of the Company since January 1994. Mr. Weiler served as President of Archer-Meek-Weiler Agency, Inc., an insurance agency (“Archer-Meek-Weiler”) located in Columbus, Ohio, from 1970 to 2002. He is currently Chairman of Archer-Meek-Weiler. He is also a director of ProCentury Corporation, a specialty property and casualty insurance holding company, and has held that position since April 2004. Mr. Weiler is active in several charitable and cultural organizations. Mr. Weiler is a Class II Trustee and a member of the Executive Committee of the Board of Trustees. Howard Gross, 64, has been a trustee of the Company since September 2004. He is currently the interim Chief Executive Officer of Eddie Bauer Holdings, Inc., a specialty retailer that sells casual sportswear and accessories (“Bauer”), and has served in that position since February 9, 2007. Mr. Gross retired in December 2003 as President and Chief Executive Officer of HUB Distributing, a privately owned regional retailing business. Mr. Gross also served as President and Chief Operating Officer of Today’s Man, a New Jersey menswear retailer, from 1995 to 1996, as well as President and Chief Executive Officer of The Limited Stores, a women’s retail clothier based in Columbus, Ohio, from 1991 to 1994, and President and Chief Executive Officer of Victoria’s Secret from 1983 to 1991. Mr. Gross received a Bachelor of Arts from the University of Akron. Mr. Gross currently serves on the advisory board of Santa Clara University Retail Management Institute. Mr. Gross also serves on the Board of Directors for Bauer and Sharper Image Corporation, a specialty retailer that sells high quality electronics, personal care products, and other accessories. Mr. Gross is a Class III Trustee and a member of the Executive Compensation Committee and Nominating and Corporate Governance Committee of the Board of Trustees. Nominees for Election as Class I Trustees Niles C. Overly, 56, has been a Class I Trustee of the Company since May 2004. He currently serves as Chairman and Chief Executive Officer of The Frank Gates Companies (“Frank Gates”), which specializes in employee benefit and risk management services. Mr. Overly became Chief Executive Officer of Frank Gates in 1983 and Chairman in 2003. He also served as General Counsel for Frank Gates from 1979 until 1983. Prior to joining Frank Gates, Mr. Overly served as an international tax consultant with Arthur Andersen and Company. He was also a partner in the law firm of Overly, Spiker, Chappano & Wood, L.P.A. for five years. Mr. Overly is a graduate of the University of Virginia McIntire School of Commerce and received his Juris Doctorate from the University of Virginia School of Law. His professional society memberships include the American, Ohio, Virginia, and Columbus (OH) Bar Associations, as well as the Ohio State and American Institute of Certified Public Accountants. He currently serves as a member of the Columbus, Ohio and Dublin, Ohio Chambers of Commerce, a member of the Board of Directors and Executive Committee of the Ohio Chamber of Commerce, and is Chairman of the Ohio Chamber of Commerce. He has also been active in the Young Presidents Organization (“YPO”), having served as the Chairman and Education Chair of YPO’s Columbus, Ohio chapter. Mr. Overly serves as Chairman of the Audit Committee. He also serves on the Executive Compensation Committee and Executive Committee of the Board of Trustees. Mr. Overly is an Audit Committee Financial Expert as determined by the Board of Trustees. William S. Williams, 53, has been a Class I Trustee of the Company since May 2004. He currently serves as Chairman and Chief Executive Officer of The W. W. Williams Company (the “Williams Company”), primarily an industrial equipment distributor headquartered in Columbus, Ohio. Mr. Williams joined the Williams Company in April of 1978 and became Chief Executive Officer in 1992. He was elected Chairman of the Williams Company in 1999. The Williams Company sells and services diesel engines, transmissions, and generator sets throughout the midwest, southeast, and southwest regions of the United States and distributes automotive parts in the midwest. Mr. Williams served on the Board of Directors of The Huntington National Bank from 1997 to 2004. He serves on the Executive Committee of the North America Distributor Council and is active in other community organizations. He is also an inactive Certified Public Accountant, holds a Bachelor of Arts in Economics from Duke University, and a Master of Business Administration in Finance from The Ohio State University. Mr. Williams serves as Chairman of the Executive Compensation Committee and is a member of the Nominating and Corporate Governance Committee of the Board of Trustees. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 14 Nominee for Election as Class III Trustee PRESIDENT’S LETTER David M. Aronowitz, 50, has been a Class III Trustee of the Company since May 5, 2006. He is currently the Executive Vice President, General Counsel, and Corporate Secretary of The Scotts Miracle-Gro Company, a manufacturer and distributor of lawn and garden care products located in Marysville, Ohio (“Scotts”). He has served in this capacity at Scotts (and its predecessor companies) since October 2001 and has been with Scotts (as well as its predecessor companies) since 1998. Mr. Aronowitz oversees all legal matters affecting Scotts, both in North America and internationally, as well as community relations and governmental affairs. During his time at Scotts and its predecessor companies, Mr. Aronowitz has served as Senior Vice President, Assistant General Counsel, and Assistant Secretary from February 2000 to October 2001 and Vice President, Assistant General Counsel from 1998 to 2000. Mr. Aronowitz has a Bachelor of Arts degree from Haverford College and a Juris Doctorate from The Yale Law School. Mr. Aronowitz is a member of the Audit Committee and Nominating and Corporate Governance Committee of the Board of Trustees. Biographies of Our Executive Officers PROXY STATEMENT Michael P. Glimcher, President and Chief Executive Officer. Biographical information regarding Mr. Michael P. Glimcher is set forth in the section of this Proxy Statement entitled “Information About Our Trustees, Trustee Nominees, & Executive Officers – Biographies of Our Trustees & Trustee Nominees.” George A. Schmidt, 59, is currently Executive Vice President and Chief Investment Officer of the Company. Mr. Schmidt has served as Executive Vice President since March 1999 and served as General Counsel and Secretary of the Company from May 1996 to January 31, 2007. He served as Senior Vice President of the Company from September 1996 until his promotion to Executive Vice President of the Company. Mr. Schmidt also served as a Class II Trustee of the Company from May 1999 to May 2005. Mr. Schmidt assumed his current duties on January 1, 2007 in which he oversees all strategic corporate investment activities for the Company, including new development, redevelopment, acquisitions, and divestitures. Mr. Schmidt has over 25 years of experience in the practice of commercial real estate law, including six years as Assistant General Counsel of DeBartolo Realty Corporation, a then listed real estate investment trust on the NYSE (“DeBartolo”), prior to joining the Company in May 1996. Mr. Schmidt has a Bachelor of Arts degree from Cornell University, a Master of Business Administration from Ohio University, and a Juris Doctorate from Case Western Reserve University. Mr. Schmidt is a member of the American, Ohio, Texas, and Columbus (OH) Bar Associations and is a member of ICSC and NAREIT. Mr. Schmidt has been a lecturer on shopping center leasing, legal, development, and corporate governance issues for the American Bar Association, ICSC, and Ohio University. Mr. Schmidt is a member of the Company’s Disclosure Committee. Marshall A. Loeb, 44, has been Executive Vice President and Chief Operating Officer since joining the Company in May 2005. Mr. Loeb provides global direction in all operational areas of the Company. Prior to joining the Company, Mr. Loeb served as Chief Financial Officer of Parkway Properties, Inc. (“Parkway”), a self-administered real estate investment trust listed on the NYSE that specializes in owning and operating office properties, from November 2000 to May 2005. Prior to his employment with Parkway, Mr. Loeb was Senior Vice President/Western Regional Director for Eastgroup Properties, Inc., a self-administered real estate investment trust listed on the NYSE that focuses on owning and operating industrial properties, from August 1991 to April 2000. Mr. Loeb holds a Master of Business Administration from the Harvard School of Business Administration. He also holds a Bachelor of Science and Master of Tax Accounting degree from the University of Alabama. Mr. Loeb is a member of ICSC and NAREIT. Mr. Loeb is a member of the Company’s Disclosure Committee. Mark E. Yale, 41, is currently Executive Vice President, Chief Financial Officer, and Treasurer of the Company. Mr. Yale served as Senior Vice President and Chief Financial Officer from August 2004 to May 2005. Mr. Yale was elected Treasurer of the Company in May 2005 and promoted to Executive Vice President on May 5, 2006. Prior to joining the Company, Mr. Yale served as Senior Vice President – Financial Reporting at Storage USA, Inc. (“Storage”), a self-administered real estate investment trust listed on the NYSE that specialized in owning and operating private storage facilities, from 1998 to May 2002 and as Manager of Finance for Storage from May 2002 to August 2004 when it became a division of the General Electric Company. Prior to joining Storage, he was a senior manager with Coopers & Lybrand L.L.P. (a predecessor firm to PricewaterhouseCoopers LLP) from 1987 to 1998. Mr. Yale has a Bachelor of Science in Business Administration from the University of Richmond and is an inactive Certified Public Accountant. FORM 10-K CORPORATE INFORMATION 15 PRESIDENT’S LETTER Mr. Yale is a member of the American Institute of Certified Public Accountants, ICSC, and NAREIT. Mr. Yale is a member of the Company’s Disclosure Committee. Kim A. Rieck, 54, has served as Senior Vice President, General Counsel and Secretary since joining the Company on February 1, 2007. Mr. Rieck oversees all legal, compliance, and governance matters for the Company. Prior to joining the Company, Mr. Rieck was of counsel with the international law firm of Squire, Sanders & Dempsey L.L.P. (“Squire”) from 1999 to 2007 practicing in the area of commercial real estate law and finance. Prior to joining Squire, he served as Senior Vice President, General Counsel and Secretary of DeBartolo from 1993 to 1996. Mr. Rieck received his Bachelor of Arts degree from Case Western Reserve University and his Juris Doctorate from The Ohio State University College of Law. Mr. Rieck is a member of the Company’s Disclosure Committee. Thomas J. Drought, Jr., 45, has been Senior Vice President, Director of Leasing since January 1, 2002. For the past nine years, Mr. Drought has served in various leasing positions with the Company, including Regional Leasing Director and Vice President of Leasing. Prior to joining the Company, Mr. Drought spent nine years with L & H Real Estate Group (formerly Landau & Heyman Ltd.) that aligned with Jones Lang LaSalle in 2004. He has more than 20 years of extensive real estate leasing experience. Mr. Drought holds the designation of Certified Leasing Specialist from ICSC. Mr. Drought is responsible for directing and overseeing leasing of the Company’s entire portfolio of properties. Kenneth D. Cannon, 63, is currently the Company’s Senior Vice President, Development. Mr. Cannon joined the Company in January 2004 as Vice President, Development with overall responsibility for implementing the Company’s development and redevelopment programs for its portfolio of regional and super-regional malls. He was promoted to Senior Vice President, Development on April 1, 2005. Prior to joining the Company, Mr. Cannon was a partner with The Pyramid Companies, a real estate developer specializing in retail properties, from 1986 to 1993, with responsibilities for new project development, and from June 1999 to December 2003, during which time his responsibilities included obtaining new department store commitments. From 1996 to 1999, he was the owner and founder of KLM Developers, LLC, a comprehensive development and construction services firm operating primarily in the mid-Atlantic area. From 1993 to 1996, he held the position of Senior Vice President, Development with Hydra-Co Enterprises, Inc. (“Hydra”), a then subsidiary of the Niagara Mohawk Power Corporation of Syracuse, New York. Prior to serving with Hydra, Mr. Cannon held positions with Tidewater, Inc. and with Texaco, Inc. Mr. Cannon is a member of ICSC. Mr. Cannon holds a Bachelor of Science degree in Business and Juris Doctorate from the University of Kansas. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 16 CORPORATE GOVERNANCE PRESIDENT’S LETTER Corporate Governance Policies & Procedures The Board of Trustees and two of its committees have adopted certain policies and procedures to guide the Board of Trustees in governing and overseeing the affairs of the Company. Some of the key topics that these polices address include: • • • • trustee independence trustee nominations review and approval of related party transactions governance of the committees of the Board of Trustees • • • • whistleblower policies meeting attendance communications to the Board of Trustees codes of ethics Set forth below is a summary of the important corporate policies and procedures utilized by the Board of Trustees in governing the Company and overseeing its affairs. Corporate Governance Guidelines and Code of Business Conduct and Ethics The Board of Trustees adopted our Corporate Governance Guidelines. The Corporate Governance Guidelines set forth various matters relating to how the Board of Trustees will govern the Company, including, without limitation, trustee qualification standards, trustee responsibilities, trustee compensation, trustee orientation, trustee term limits, trustee continuing education, and the relationship between the Board of Trustees, management, and independent advisors. The Board of Trustees has also adopted a Code of Business Conduct and Ethics that sets forth various policies for Company employees, agents, and representatives to follow in conducting business activities and transactions on our behalf. The Corporate Governance Guidelines and the Code of Business Conduct and Ethics are available on our website at www.glimcher.com. A copy of the Corporate Governance Guidelines and a copy of the Code of Business Conduct and Ethics are available in print to any shareholder who requests them in writing from the Company’s Secretary at the following address: Glimcher Realty Trust, 150 East Gay Street, Columbus, Ohio 43215. Code of Ethics for Senior Financial Officers The Board of Trustees adopted our Code of Ethics for Senior Financial Officers, applicable to the Company’s Chairman of the Board, Chief Executive Officer, Chief Financial Officer, and Controller, which is available on the Company’s website at www.glimcher.com. The Code of Ethics for Senior Financial Officers supplements our Code of Business Conduct and Ethics and sets forth specific policies to guide the Company’s Senior Financial Officers in the performance of their duties. A copy of the Code of Ethics for Senior Financial Officers is available in print to any shareholder who requests it in writing from the Company’s Secretary at the following address: Glimcher Realty Trust, 150 East Gay Street, Columbus, Ohio 43215. Policy for the Reporting of Questionable Accounting or Financial Matters PROXY STATEMENT FORM 10-K CORPORATE INFORMATION The Audit Committee of the Board of Trustees adopted our Policy for the Reporting of Questionable Accounting or Financial Matters which is available on the Company’s website at www.glimcher.com. A copy of the Policy for the Reporting of Questionable Accounting or Financial Matters is available in print to any shareholder who requests it in writing from the Company’s Secretary at the following address: Glimcher Realty Trust, 150 East Gay Street, Columbus, Ohio 43215. Communications Between Shareholders and the Board of Trustees Shareholders and other interested persons seeking to communicate with the Board of Trustees, including any of the independent members of the Board of Trustees, should submit any communications in writing to the Company’s Secretary at the following address: Glimcher Realty Trust, 150 East Gay Street, Columbus, Ohio 43215. Any such communication must state the number of shares beneficially owned by the 17 PRESIDENT’S LETTER shareholder making the communication. The Company’s Secretary will forward such communication to the full Board of Trustees or to any individual trustee or trustees to whom the communication is directed. Trustee Nominations The Nominating and Corporate Governance Committee will consider candidates for the Board of Trustees submitted by shareholders in accordance with: (i) the Bylaws, (ii) the provisions of the Amended and Restated Nominating and Corporate Governance Committee Charter, (iii) the Board of Trustees’ policy for shareholder nominated trustees as set forth below, and (iv) the policies more fully described in the section of this Proxy Statement entitled “General Information – Shareholder Proposals.” Any shareholder wishing to submit a candidate for consideration should send the following information to the Company’s Secretary at the following address: Glimcher Realty Trust, 150 East Gay Street, Columbus, Ohio 43215: • Shareholder’s name, number of shares owned, length of period held, and proof of ownership; • Name, age, and address of candidate; PROXY STATEMENT • A detailed resume describing, among other things, the candidate’s educational background, occupation, employment history for at least the previous five years, and material outside commitments (e.g., memberships on other boards and committees, charitable foundations, etc.); • A supporting statement which describes the candidate’s reasons for seeking election to the Board of Trustees; • A description of any current or past arrangements or understandings between the candidate and the Company or its executive officers or trustees; • Other relevant factors or considerations; and • A signed statement from the candidate, confirming his/her willingness to serve on the Board of Trustees. The Company’s Secretary will promptly forward such materials to the Chairperson of the Nominating and Corporate Governance Committee. The Company’s Secretary also will maintain copies of such materials for future reference by the Nominating and Corporate Governance Committee when filling positions on the Board of Trustees. The Nominating and Corporate Governance Committee will consider shareholder nominated candidates if a vacancy arises or if the Board of Trustees decides to expand its membership and at such other times as the Nominating and Corporate Governance Committee deems necessary or appropriate. There are no differences in the manner in which the Nominating and Corporate Governance Committee evaluates trustee nominees submitted by shareholders as opposed to some other source. Minimum Qualifications and Process for Identifying and Evaluating Trustee Nominees The Company does not set specific criteria for members of the Board of Trustees of the Company except to the extent required by our Bylaws or to meet applicable legal, regulatory, and stock exchange requirements, including, but not limited to, the independence requirements of the NYSE and the Securities and Exchange Commission (“SEC”), as applicable. Nominees for trustee will be selected in accordance with the criteria set forth in our Bylaws and Corporate Governance Guidelines and on the basis of various other factors and criteria which the Board of Trustees deem relevant, including, without limitation, the achievement in their personal careers; experience serving on corporate boards, wisdom, integrity, ability to make independent, analytical inquiries, understanding of the business environment, and willingness to devote adequate time to performing the duties incumbent upon members of the Board of Trustees. While the selection of qualified trustees is a complex and subjective process that requires consideration of many intangible factors, the Nominating and Corporate Governance Committee should believe that each nominee for trustee would have the capacity, if chosen to serve on the Board of Trustees, to have a basic understanding of: (i) the principal operational and financial objectives and plans and strategies of the Company, (ii) the results of operations and financial condition of the Company and of any significant subsidiaries or business segments, and (iii) the relative position of the Company and its business segments in relation to its competitors. CORPORATE INFORMATION FORM 10-K 18 When nominating a sitting trustee for re-election at an annual meeting, the Nominating and Corporate Governance Committee will consider the trustee’s performance on the Board of Trustees and the trustee’s qualifications in respect of the foregoing. Under the Corporate Governance Guidelines, any trustee who has served on the Board of Trustees for twenty (20) consecutive years or has reached the age of seventy-five (75) shall not be eligible for nomination for re-election to the Board of Trustees except for (i) the current Chairman of the Board of Trustees (in recognition of his status as founder of the Company) or (ii) any trustee who, based upon the recommendation of the Chief Executive Officer or a Nominating and Corporate Governance Committee member, as approved by the Nominating and Corporate Governance Committee, is regarded as a resource of high value to the Board of Trustees. The Nominating and Corporate Governance Committee is willing to consider candidates submitted by a variety of sources (including incumbent trustees, shareholders, Company management, and third party search firms) when reviewing candidates to fill vacancies and/or expand the Board of Trustees. If a vacancy arises or the Board of Trustees decides to expand its membership, the Nominating and Corporate Governance Committee will ask each trustee to submit a list of potential candidates for consideration. The Nominating and Corporate Governance Committee will then evaluate each potential candidate’s educational background, employment history, outside commitments, and other relevant factors and criteria to determine whether the candidate is potentially qualified to serve on the Board of Trustees. At that time, the Nominating and Corporate Governance Committee also will consider potential nominees submitted by shareholders, if any, in accordance with the Bylaws and the procedures adopted by the Board of Trustees, the Company’s management and, if the Nominating and Corporate Governance Committee deems it necessary, retain an independent third party search firm to provide potential candidates. The Nominating and Corporate Governance Committee will seek to identify and recruit the best available candidates, and it intends to evaluate qualified shareholder nominees on the same basis as those submitted by Board of Trustees members, Company management, third party search firms, or other sources. After completing this process, the Nominating and Corporate Governance Committee will determine whether one or more candidates are sufficiently qualified to warrant further investigation. If the process yields one or more desirable candidates, the Nominating and Corporate Governance Committee will rank them by order of preference, depending on their respective qualifications and the Company’s needs. The Nominating and Corporate Governance Committee Chairperson will then contact the preferred candidate(s) to evaluate their potential interest and to set up interviews with the full Nominating and Corporate Governance Committee. All such interviews are held in person and include only the candidate and the Nominating and Corporate Governance Committee members. Based upon interview results and appropriate background checks, the Nominating and Corporate Governance Committee then decides whether it will recommend the candidate’s nomination to the full Board of Trustees. Policies and Procedures for Reviewing and Approving Related Party Transactions The Audit Committee of the Board of Trustees has the responsibility for reviewing, approving (or disapproving), or ratifying any Related Party Transaction (this term is defined in the next paragraph). Our policies and procedures that govern the disclosure of Related Party Transactions and the Audit Committee’s process in reviewing and assessing a Related Party Transaction are described in our Code of Business Conduct and Ethics which is available on our website at www.glimcher.com. Under our Code of Business Conduct and Ethics, we define a “Related Party Transaction” as any business or financial relationship or transaction of any type or proposed business or financial relationship or transaction of any type between the Company (or any of its affiliates) and (i) any employee, trustee, officer or Family Member (this term is defined below) of such personnel, (ii) an entity in which any employee, trustee, officer or Family Member of such personnel has a direct or indirect interest (whether ownership, financial or otherwise), or (iii) any entity that has any business or financial relationship or arrangement with any employee, trustee, officer or Family Member of such personnel. The term “Family Member” is defined in our Code of Business Conduct and Ethics as the spouse, parents, children, siblings, grandparents, grandchildren, nieces and nephews, aunts and uncles, mothers and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law of such employee, trustee or officer of the Company, regardless of whether they share the same household. For the avoidance of doubt, any employee, officer or trustee of the Company or Family Member of such personnel who has a position, relationship or arrangement (whether financial or otherwise) with an individual, firm, corporation, partnership, trust or other entity that engages in a business or financial relationship or arrangement with the Company will be deemed to have an indirect interest in such relationship or arrangement. PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 19 Neither the Company nor its employees, officers and trustees shall engage in a Related Party Transaction unless the material terms and conditions of the transaction are (i) disclosed to the Audit Committee, (ii) approved in advance by the Audit Committee, and (iii) deemed by the Audit Committee to be no less favorable to the Company and its subsidiaries than the terms and conditions that could have been obtained from unaffiliated parties in an arm’s length transaction. All employees, officers and trustees of the Company who become aware of the existence of any existing, proposed, or potential Related Party Transaction are encouraged to bring that information to the attention of a supervisor, manager, or other appropriate Company personnel. In reviewing any existing, proposed, or potential Related Party Transaction, the Audit Committee will conduct itself in accordance with all applicable laws and in accordance with our governance documents. The Audit Committee will consider all relevant facts and circumstances to determine whether a Related Party Transaction exists, is proposed, or may occur and whether or not to approve the transaction. The Audit Committee may interview any Company personnel and any other third party that it deems appropriate or necessary to assist it in determining (i) whether there is a Related Party Transaction and (ii) whether to approve the transaction. In connection with any review by the Audit Committee, it shall have access to all documents in the Company’s possession and shall have the authority to request additional documents it deems appropriate or necessary from any employee, trustee, officer, or Family Member of such personnel and any third party. All Company personnel shall cooperate with any document or information requests made by the Audit Committee in connection with its review of a transaction. In connection with the Audit Committee’s review of any existing, proposed, or potential Related Party Transaction, the Audit Committee shall have the authority to engage independent counsel, accounting, or other consultants to advise it as it determines appropriate. If a Related Party Transaction is approved by the Audit Committee, the Company will disclose the existence and material terms of the transaction in its securities filings if and to the extent required by applicable securities laws. The Audit Committee shall inform the Board of any approval or non-approval of a Related Party Transaction. The Disclosure Committee The Disclosure Committee is currently composed of Ms. Janette P. Bobot and five of the Company’s executive officers, Messrs. Michael P. Glimcher, George A. Schmidt, Marshall A. Loeb, Mark E. Yale, and Kim A. Rieck. Ms. Bobot is the Chairperson of the Disclosure Committee and also director of the Company’s department of internal audit. The function of the Disclosure Committee is to ensure the accuracy, completeness, and timeliness of any and all disclosures made to the Company’s shareholders and the investment community as to the Company’s financial condition and results of operations in all material respects. The Disclosure Committee is not a committee of the Board of Trustees. The Disclosure Committee met four (4) times during the fiscal year ended December 31, 2006. The Chief Executive Officer and the Chief Financial Officer have adopted a Disclosure Committee Charter and it is available on our website at www.glimcher.com. The Disclosure Committee Charter sets out the responsibilities, authority, and specific duties of the Disclosure Committee. Trustee Independence The Board of Trustees and Nominating and Corporate Governance Committee have determined that Messrs. Aronowitz, Doran, Gross, Overly, and Williams are trustees that meet the independence requirements of the NYSE. The Board of Trustees has made such a determination based on the fact that none of the listed persons have had, or currently have, any material relationship with the Company that would currently impair their independence, including, without limitation, any commercial, industrial, banking, consulting, legal, accounting, charitable, or familial relationship. The independent members of the Board of Trustees (excluding Mr. Philip G. Barach) determined that Mr. Barach no longer satisfied the independence requirements of the NYSE as a result of his having entered into a consulting agreement with the Company on February 22, 2007 that provides for him to perform consulting services upon the expiration of his current term as a Class I Trustee at the Annual Meeting (or such earlier date following his resignation from the Board of Trustees). Despite this development, a majority of the trustees on the Board of Trustees continue to satisfy the independence requirements of the NYSE. Mr. Barach satisfied the independence requirements of the NYSE during fiscal year 2006. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT PRESIDENT’S LETTER 20 OUR BOARD OF TRUSTEES, ITS COMMITTEES, & THEIR POLICIES PRESIDENT’S LETTER Our Board of Trustees currently has nine members and two vacancies. The persons comprising the Board of Trustees also constitute all of the directors on the Board of Directors of Glimcher Properties Corporation, a wholly-owned subsidiary of the Company. During the Company's fiscal year ended December 31, 2006, the Board of Trustees held four (4) regular quarterly meetings and one special meeting. All of the trustees attended at least 75% of all of the meetings of the Board of Trustees and the committees thereof on which they serve. All members of the Board of Trustees are expected to attend in person the Company’s Annual Meeting and be available to address questions or concerns raised by shareholders. Eight members of the Board of Trustees attended the 2006 Annual Meeting of Shareholders. Additionally, during the Company’s fiscal year ended December 31, 2006, non-management trustees met without management in regularly scheduled executive sessions over which the lead trustee of the independent members of the Board of Trustees presided. Mr. Wayne S. Doran served as lead independent trustee during the 2006 fiscal year. The Board of Trustees has four standing committees: an Executive Committee, an Audit Committee, a Nominating and Corporate Governance Committee, and an Executive Compensation Committee. Each committee’s membership and responsibilities are discussed below. Executive Committee The members of the Executive Committee are Messrs. Wayne S. Doran, Herbert Glimcher, Michael P. Glimcher, Niles C. Overly, and Alan R. Weiler. Herbert Glimcher is the Chairman of the Executive Committee. The function of the Executive Committee is to generally exercise all the powers of the Board of Trustees except those which are prohibited pursuant to resolutions adopted by the Board of Trustees or which require action by all trustees or independent trustees under applicable law, the provisions of the Bylaws or Declaration of Trust. The Executive Committee did not meet during the fiscal year ended December 31, 2006, but acted by unanimous written consent on one (1) occasion. Audit Committee The current members of the Audit Committee are Messrs. David M. Aronowitz, Wayne S. Doran, and Niles C. Overly. Mr. Overly is the Chairman of the Audit Committee. Each member of the Audit Committee qualifies as an “independent” trustee under the listing standards of the NYSE and the rules promulgated by the SEC. The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The function of the Audit Committee is to: (i) appoint and replace the Company’s independent registered public accounting firm, (ii) review with the independent registered public accounting firm the audit plans and results of the audit engagement, (iii) approve professional services provided by the independent registered public accounting firm, (iv) review the qualifications and independence of the independent registered public accounting firm, (v) consider the range of audit and non-audit fees, (vi) review the adequacy of the Company’s internal accounting controls, (vii) review and approve any related party transactions, and (viii) investigate reports of ethical and regulatory violations within the Company. The Audit Committee also reviews the results of management’s assessment of internal control over financial reporting set forth in Management’s Report on Internal Control Over Financial Reporting. The Audit Committee met eight (8) times during the fiscal year ended December 31, 2006. The Board of Trustees has adopted an Audit Committee Charter, a current copy of which is available on our website at www.glimcher.com. A copy of the Audit Committee Charter is also available in print to any shareholder who requests it in writing from the Company’s Secretary at the following address: Glimcher Realty Trust, 150 East Gay Street, Columbus, Ohio 43215. The Audit Committee Charter sets forth the responsibilities, authority, and specific duties of the Audit Committee as well as the structure and membership requirements of the Audit Committee, the relationship of the Audit Committee to the Company’s independent registered public accounting firm, the Company’s internal audit department, and Company management. The federal securities laws require the Audit Committee to make certain statements regarding their review of the Company’s financial statements and their discussions with the Company’s independent registered public accounting firm about those statements. These statements appear in the section of this Proxy Statement entitled “Audit Committee Statements.” PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 21 Audit Committee Financial Expert PRESIDENT’S LETTER The Board of Trustees has determined that Mr. Niles C. Overly is qualified to serve as an Audit Committee Financial Expert in accordance with the independence and experience requirements of the NYSE, the Exchange Act, and other applicable laws, including the Sarbanes-Oxley Act of 2002. Nominating and Corporate Governance Committee The members of the Nominating and Corporate Governance Committee are Messrs. Wayne S. Doran, David M. Aronowitz, Howard Gross, and William S. Williams. Mr. Doran is the Chairman of the Nominating and Corporate Governance Committee. Each member of the Nominating and Corporate Governance Committee qualifies as an “independent” trustee under the listing standards of the NYSE. The function of the Nominating and Corporate Governance Committee is to: (i) identify individuals qualified to be members of the Board of Trustees, (ii) propose to the Board of Trustees nominees for election at the next annual meeting of the Company’s shareholders, (iii) recommend to the Board of Trustees any modifications or enhancements to the Corporate Governance Guidelines, and (iv) recommend to the Board of Trustees the trustee nominees for each committee of the Board of Trustees and for the Chairperson of each such committee. The Nominating and Corporate Governance Committee met four (4) times during the fiscal year ended December 31, 2006. The Board of Trustees has adopted a written charter for the Nominating and Corporate Governance Committee and it is available on our website at www.glimcher.com. A copy of the Amended and Restated Nominating and Corporate Governance Committee Charter (the “Charter”) is available in print to any shareholder who requests it in writing from the Company’s Secretary at the following address: Glimcher Realty Trust, 150 East Gay Street, Columbus, Ohio 43215. The Charter sets out the responsibilities, authority and specific duties of the Nominating and Corporate Governance Committee. Executive Compensation Committee The members of the Executive Compensation Committee are Messrs. Niles C. Overly, Howard Gross, and William S. Williams. Mr. Williams is the Chairman of the Executive Compensation Committee. Each member of the Executive Compensation Committee qualifies as an “independent” trustee under the listing standards of the NYSE. The Board of Trustees has adopted a written charter for the Executive Compensation Committee and it is available on our website at www.glimcher.com. A copy of the Amended and Restated Executive Compensation Committee Charter is also available in print to any shareholder who requests it in writing from the Company’s Secretary at the following address: Glimcher Realty Trust, 150 East Gay Street, Columbus, Ohio 43215. The Amended and Restated Executive Compensation Committee Charter sets out the responsibilities, authority, and specific duties of the Executive Compensation Committee. It also specifies, among other things, the structure and membership requirements of the Executive Compensation Committee, as well as the relationship of the Executive Compensation Committee to any independent compensation consultants and management of the Company. The Executive Compensation Committee met nine (9) times during the fiscal year ended December 31, 2006 and acted by unanimous written consent on three (3) occasions. The Executive Compensation Committee’s scope of authority includes the following: (i) to approve all compensation (including, but not limited to, salary, equity awards, benefits, and perquisites) and hiring matters relating to any individual employed by the Company (including any affiliate) who holds the position of Vice President and higher; (ii) to make all decisions relating to the termination of any individual employed by the Company (including any affiliate) who holds the position of Senior Vice President and higher; (iii) to review and approve corporate goals and objectives relating to the compensation of the Company’s Chief Executive Officer; (iv) to evaluate, review and approve compensation packages for members of the Board of Trustees and, as determined by the Executive Compensation Committee from time to time, salaries for Company personnel who are employed in positions below that of Vice President; CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 22 (v) to retain and terminate any compensation consultant or consulting firm to be used to assist it in the evaluation of compensation matters and to obtain advice and assistance from internal or external legal, accounting, or other advisors; (vi) to approve and determine fees and other retention terms for compensation consultants that are hired to assist in investigations into or studies of matters within the Executive Compensation Committee’s responsibilities, and retain, at the Company’s expense, such independent counsel and other advisors as it deems necessary for such purposes; and (vii) to perform such duties and responsibilities as may be assigned to the Executive Compensation Committee under the terms of any of the Company’s management or employee compensation, equity-based or benefit plans, or by the administration committee of such plans. The Executive Compensation Committee may delegate any of its duties mentioned above to the extent permitted by the Amended and Restated Executive Compensation Committee Charter, the Bylaws, Declaration of Trust, Corporate Governance Guidelines, or applicable law. To the extent permitted, its duties may be delegated to subcommittees of the Executive Compensation Committee or certain officers of the Company. Also, the Executive Compensation Committee may delegate, to Company personnel employed in positions of Senior Vice President and higher, its approval of awards from the Company’s equity compensation plans to persons who hold positions of Vice President and below, provided such delegation does not violate the terms of the Amended and Restated Executive Compensation Committee Charter, Corporate Governance Guidelines, the applicable plan, or any other applicable law or regulation. Furthermore, under the Amended and Restated Executive Compensation Committee Charter, the Executive Compensation Committee is prohibited from delegating to a subcommittee any decision relating to the compensation or evaluation of the Board of Trustees, Chief Executive Officer, the Executive Compensation Committee itself, or any officer of the Company employed as Senior Vice President or higher. In determining the amount and form of annual compensation for the Company’s executive officers and trustees, the Executive Compensation Committee uses annual performance reviews and guidance from a compensation consultant. Below is a discussion of how the Executive Compensation Committee uses information from each of these sources to make its determinations. PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K Performance Reviews The annual performance evaluations of the Company’s Senior Vice Presidents and higher are performed by the Company’s Chief Executive Officer and the Executive Compensation Committee conducts its own annual evaluation of the Chief Executive Officer's performance. Each of the senior executive officers, including the Chief Executive Officer, are assessed on the basis of the Company’s annual operating results, individual objectives, and leadership skills. At the beginning of the year, the Chief Executive Officer approves the individual goals and objectives of the Company’s Senior Vice Presidents and above and the Chief Executive Officer discusses his own goals and objectives with the Executive Compensation Committee. The goals and objectives of the senior executive officers, including the Chief Executive Officer, may be revised throughout the year in order to make necessary adjustments based upon changing business conditions and unforeseen events. As part of their annual performance evaluations, each senior executive officer, including the Chief Executive Officer, completes a self-assessment and participates in a formal evaluation of the goals and objectives established by the officer at the beginning of the year. The Executive Compensation Committee makes determinations pertaining to salary adjustments, equity awards, and annual performance bonuses for senior executives based, in part, on the Chief Executive Officer’s evaluation of the performance of Senior Vice Presidents and above. The Executive Compensation Committee uses its own evaluations to determine the annual salary adjustments, equity awards, and annual performance bonus for the Chief Executive Officer. Compensation Consultant The Executive Compensation Committee engaged Hewitt Associates, LLC, a global executive compensation consulting firm (“Hewitt”), to assist it in making compensation determinations with respect to the Company’s senior executive officers and trustees as well as structuring the Company’s executive compensation programs and plans. The scope of Hewitt’s duties primarily include providing the following to the Executive Compensation Committee: CORPORATE INFORMATION 23 PRESIDENT’S LETTER (i) data and guidance that the Executive Compensation Committee may use to make decisions that are consistent with the Company’s business strategy, compensation philosophy, prevailing market practices, relevant legal and regulatory mandates, and shareholder interests; (ii) equity and non-equity incentive compensation plan design and advice for both annual and various long-term incentive compensation plan structures that will meet the Company’s objectives and competitive market best practice philosophies; (iii) competitive market compensation studies to be used in determining base salary, bonus, long-term incentive awards, and periodic reviews of other elements of compensation for the Company’s Chief Executive Officer and other senior executive officers; and (iv) data and guidance about best practice philosophies, competitive market compensation studies, and competitive pay levels with respect to trustee compensation. PROXY STATEMENT In addition to the information obtained from our annual performance reviews and existing salary data within our industry, the Executive Compensation Committee also uses compensation studies compiled by Hewitt to make its determinations on executive and trustee compensation. Compensation Committee Interlocks and Insider Participation The Executive Compensation Committee currently consists of Messrs. Niles C. Overly, Howard Gross, and William S. Williams. Mr. Philip G. Barach also served on the Executive Compensation Committee during fiscal year 2006 through February 21, 2007. On February 22, 2007 (the “Signing Date”), Mr. Philip G. Barach entered into a consulting agreement with the Company. Under the consulting agreement, Mr. Barach will provide consulting services to the Company for a period of one year, to begin the earlier of his resignation from the Board of Trustees or the day his term as a Class I Trustee concludes, for which he will receive a consulting fee of $120,000. Additionally, under the consulting agreement, Mr. Barach shall be reimbursed for all reasonable travel expenses incurred in rendering consulting services to the Company and has been paid $14,000 in reimbursements for expenses incurred, as of the Signing Date, during his tenure on the Board of Trustees. The Board of Trustees has appointed the Executive Compensation Committee (or a duly authorized subcommittee thereof) to serve as the administrators of the Company’s compensation and option plans. The Executive Compensation Committee is the administrator for the Company’s 1997 Plan, 2004 Plan, and the Amended Plan. As the administrator, the Executive Compensation Committee, determines the number of options and other awards granted to the trustees and employees of the Company under the Amended Plan and, to the extent that awards are granted, the 1997 Plan. None of the current members of the Executive Compensation Committee are or were ever officers and/or employees of the Company or any of its subsidiaries. The Executive Compensation Committee has prepared a Compensation Committee Report. The text of this report can be found in the section of this Proxy Statement entitled “Compensation Committee Report.” REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION FORM 10-K 24 COMPENSATION OF OUR EXECUTIVE OFFICERS & TRUSTEES PRESIDENT’S LETTER Compensation Discussion and Analysis Introduction In this section we will explain all of the important elements of compensation for the senior executive officers listed in the tables that follow this section. We will first describe the objectives of our compensation program for those senior executive officers as well as executive compensation generally. We will then explain what our executive compensation program is designed to reward, describe each compensation element for the senior executive officers listed in the tables, and discuss our reasons for choosing to pay the compensation elements that we have discussed. As we discuss each element of compensation in our executive compensation program, we will also discuss: (i) how we generally determined the payment amount for that particular element of compensation; (ii) how each compensation element and our decision regarding that element fits into our overall objectives for our executive compensation programs; and (iii) how decisions about one element of compensation affects, if at all, our decisions regarding other compensation elements. Throughout this section we will refer to the senior executive officers listed in the tables that follow this section as the “Named Executives.” Objectives of Our Executive Compensation Program The goal of our compensation program for our senior executive officers, as well as our executive officers generally, is to provide compensation that is fair and equitable to both the executive officer and our company. We attempt to accomplish this goal by establishing a compensation program for our senior executive officers with the following objectives: PROXY STATEMENT FORM 10-K (i) to provide compensation for performance based upon the person’s contribution to our company, the operational results of the department in our company that the officer is responsible for managing, and the annual financial results of our company; (ii) to attract and keep senior executive officers who are important to the success of our company by awarding compensation that is competitive with companies that are comparable to our company in size and operation; (iii) to motivate senior executive officers to focus their performance on both the long-term and shortterm goals of our company and align their motivations with those of our shareholders; and (iv) to encourage senior executive officers to increase their ownership of Common Stock in our company over the course of their employment. What Our Executive Compensation Program is Designed to Reward Our executive compensation program is designed to reward the operating performance of our company as well as individual performance. (i) Company Operating Performance Our company is a real estate investment trust or REIT that primarily owns, leases, acquires, develops, and operates regional and super regional shopping malls. In order to maintain our REIT status, we must distribute at least 90% of our ordinary taxable income to our shareholders. Therefore, we use funds from operations or FFO as a supplemental measure to net income to measure our operating performance. FFO is the commonly accepted and recognized measure of operating performance for REITs by the real estate industry. FFO is defined by the National Association of Real Estate Investment Trusts or NAREIT as net income (or loss) available to common shareholders (computed in accordance with Generally Accepted Accounting Principles CORPORATE INFORMATION 25 or GAAP), excluding gains or losses from sales of depreciable property, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We believe that per share growth in both net income and FFO are important factors in enhancing shareholder value and therefore a component of our executive compensation program is designed to reward growth in our company’s FFO. Although FFO is partly influenced by market forces that are beyond our control, we feel that our senior executive officers, including the Named Executives, have the greatest opportunity to influence growth in this area and therefore we base a part of their total compensation on an evaluation of our company’s annual FFO results. To fully understand FFO, it is important to note that FFO does include impairment losses for properties held-for-use and held-for-sale. Also, FFO does not represent cash flow from our operating activities in accordance with GAAP and our FFO may not be directly comparable to similarly titled measures reported by other REITs. Moreover, FFO does not represent cash flow from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of our financial performance or to cash flow from operating activities (determined in accordance with GAAP), as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make cash distributions. Other factors that we use to measure our operating performance include occupancy levels at our regional shopping mall properties, property sales, completion or initiation of development or redevelopment projects, and completed joint venture or partnering initiatives. These factors are generally used for individual goals or objectives because they generally are heavily influenced by the actions of a particular senior executive officer, department, or functional area within our company. (ii) Individual Performance Our executive compensation program also rewards individual performance. Measuring the performance of a particular executive officer, generally, is done by assessing: (A) the executive’s achievement of predetermined goals and objectives that are linked to our overall corporate operations and goals and (B) the results of the particular department or area within our company that the executive officer is responsible for managing or leading. In assessing individual performance, consideration is also given to the executive officer’s tenure with our company and position in our management structure. Individual goals or objectives of the Named Executives differ for each person, but some examples include: completion of property financing transactions, development of corporate management aides, disposition of held-for-sale assets, and attaining rent or occupancy targets for our permanent tenants and specialty leasing tenants. The Elements of Compensation Within Our Executive Compensation Program (i) Base Salary We provide base salaries for each of the Named Executives and to all of our other executive officers. Their annual salaries are intended to create a minimum level of compensation and designed to achieve each of the four objectives of our executive compensation program by: (A) motivating the executive officer’s longterm and short-term performance, (B) aligning the objectives of the executive officer with those of our shareholders, and (C) providing a salary that is proportionate to the scope of the respective person’s responsibilities and contributions to our company taking into account competitive market compensation paid to similar positions by other companies comparable to our company in size and operation. Generally, we attempt to target the annual base salaries for our senior executive officers, including the Named Executives, to be competitive with a sample of REITs that we compete with for customers, investors, and executive talent; however, we do not directly tie our compensation decisions at any particular range or level of total compensation paid to senior executives at these companies. On an annual basis, the salaries of our senior executive officers are compared against the base salaries of senior executive officers at REITs comparable to us in size and operation. Based upon this review during 2006, the annual base salaries of our senior executive officers, including the Named Executives, were adjusted which resulted in 2006 base salaries reflecting an average increase of 4% from 2005 levels. Additionally, individual salaries of senior executive officers may be adjusted during the year on a caseby-case basis because: (A) the individual’s base salary has fallen behind the minimum of the salary range paid to similar positions by other companies comparable to us in size and operation, (B) the individual is at CORPORATE INFORMATION FORM 10-K PROXY STATEMENT PRESIDENT’S LETTER 26 risk of leaving our company or being recruited away, (C) the individual is identified as having high potential within our company, (D) the individual’s job responsibilities have expanded to the point of warranting a title change, or (E) superior individual performance. Generally, in making equity adjustments to the base salaries of our senior executive officers as a group or on an individual basis, consideration is also given as to whether adjustments to equity compensation, bonus compensation, perquisites, and other forms of compensations are warranted. For example, during 2006 our Chief Financial Officer was promoted from Senior Vice President to Executive Vice President and his bonus opportunity under our 2006 Executive Bonus Plan was adjusted from 20% to 30% of base salary and his severance payout was increased from two times (2x) to three times (3x) the base salary amount determined under his Severance Benefits Agreement. Salaries for the Named Executives are reflected in column (c) of the Summary Compensation Table and, generally, account for approximately 47% – 82% of a Named Executive’s total annual compensation that is reported in the Summary Compensation Table. (ii) Annual Bonus PRESIDENT’S LETTER The annual bonuses for our senior executive officers are designed to motivate and reward executive performance during the year. Historically, the annual bonus for our senior executive officers is a cash payment that is awarded in March for performance during the previous year. The amount of the bonus payment for our senior executive officers, including the Named Executives, during 2006 is determined based upon the terms and conditions of our 2006 Executive Bonus Plan. The 2006 Executive Bonus Plan is the only bonus plan in which the Named Executives participate. Each year the Executive Compensation Committee determines which senior executive officers will participate in that year’s Executive Bonus Plan and approves the terms and conditions of the respective plan. Actual award payouts under the 2006 Executive Bonus Plan vary amongst the plan participants, including the Named Executives, and are ultimately determined by the Executive Compensation Committee. In making award determinations under the 2006 Executive Bonus Plan, the Executive Compensation Committee has the authority and discretion to take into consideration the impact of unanticipated and extraordinary factors or events that affected the Company or an individual’s performance during the year, such as the dilutive impact of selling particular assets or the accounting treatment for assets that have diminished in value during the year, and the effect of such events on the achievement of certain corporate or individual goals or objectives. This use of discretion by the Executive Compensation Committee is reviewed by our Board of Trustees, which has a majority of independent trustees, in approving compensation determinations by the Executive Compensation Committee. Under the 2006 Executive Bonus Plan, the final bonus payment amounts are determined based upon an evaluation of a senior executive officer’s individual performance and the Company’s operating performance. Individual performance is measured by the person’s achievement of goals or objectives established at the beginning of the year and the Company’s performance is determined based upon a review and evaluation of our year-end FFO performance. Under the plan, an individual may have between five to eight performance objectives. Therefore, an individual’s bonus payment amount is the sum of two components: (A) the portion of the payment based upon a review and evaluation of our year-end FFO performance (the “FFO Component”) and (B) the portion of the payment based upon the achievement of the individual’s objectives (the “Individual Objectives Component”). In determining the FFO Component and Individual Objectives Component that comprise a Named Executive’s bonus payment under the 2006 Executive Bonus Plan, the following bonus payout targets must be determined: (A) Target Bonus Payout Amount, (B) FFO Target, and (C) Individual Objectives Target. An individual’s Target Bonus Payout Amount must first be determined. The FFO Target and Individual Objectives Target are percentages of the Target Bonus Payout Amount. The Target Bonus Payout Amount is determined as follows for the Named Executives: • Chief Executive Officer: 60% of base salary, • Executive Vice Presidents: 30% of base salary, and • Senior Vice President: 20% of base salary A participant’s FFO Target is 70% of their Target Bonus Payout Amount and is used to determine the portion of their bonus payment that is determined following a review and evaluation of our year-end FFO performance (i.e., the FFO Component). A participant’s Individual Objectives Target is 30% of their Target Bonus Payout Amount and is used to determine the portion of their bonus payment that is based upon achievement of individual objectives (i.e., the Individual Objectives Component). The Target Bonus Payout Amount, FFO Target, and Individual Objectives Target do not represent the bonus payment amounts under PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 27 PRESIDENT’S LETTER the plan. The Target Bonus Payout Amount, FFO Target, and Individual Objectives Target for each of the Named Executives are listed in the table below: Named Executive CEO/President EVP/Chief Operating Officer EVP/Chief Financial Officer EVP/Chief Investment Officer SVP/Director of Leasing Target Bonus Payout Amount $298,368 $107,908 $80,160 $91,608 $56,928 FFO Target $208,858 $75,536 $56,112 $64,126 $39,850 Individual Objectives Target $89,510 $32,372 $24,048 $27,482 $17,078 PROXY STATEMENT Under the 2006 Executive Bonus Plan, the FFO Component is determined based upon a review and evaluation of our year-end FFO performance and is evaluated at: (A) minimum, (B) moderate, (C) target, and (D) excellence. The Individual Objectives Component is determined based upon the achievement of individual objectives and is graded at: (A) threshold, (B) target, and (C) excellence. The table below illustrates how the components of a bonus payment under the 2006 Executive Bonus Plan are determined for achievement at the various levels: Bonus Payment Component FFO Component Minimum 50% of FFO Target Moderate 75% of FFO Target Target 100% of FFO Target Excellence 150% of FFO Target Threshold 75% of the Individual Objectives Component (measured on Individual Objectives Target a per objective basis and aggregated) Target 100% of the Individual Objectives Target Excellence 125% of the Individual Objectives Target The bonus payout award under the 2006 Executive Bonus Plan, for each of the Named Executives, is reflected in column (f) of the Summary Compensation Table and is the sum of the Named Executive’s Individual Objectives Component and the FFO Component. The bonus payment amount under the 2006 Executive Bonus Plan, generally, accounts for approximately 7% – 13% of a Named Executive’s total annual compensation that is reported in the Summary Compensation Table. (iii) Equity Compensation We make annual grants of stock options and restricted Common Stock to our senior executive officers, including the Named Executives, as part of their compensation arrangement. Stock option and restricted Common Stock grants are usually made in early March or May. We selected this timing because it enables us to consider the prior year performance of our company and senior management as well as our expectations of the individual and our company for the coming year. The Executive Compensation Committee’s schedule is determined several months in advance and the proximity of any awards to public announcements or other market events relating to our company is purely coincidental. Similar to other elements of compensation, we believe that the issuance of stock options and restricted Common Stock to senior executive officers furthers the objectives of our compensation program, particularly our desire to motivate senior executive officers to focus their performance on both the long-term and short-term goals of our company and align their motivations to those of shareholders. Unlike annual bonus determinations, the size of an individual’s equity awards is not primarily based upon the achievement of predetermined performance goals by our company or individual performance goals, but rather is the product of the Executive Compensation Committee’s: (A) consideration of the anticipated performance of the individual and our company in the coming year; (B) review of historical award amounts for the respective management position; (C) overall review and assessment of our company’s performance in the most recently completed year; (D) review of market data on equity compensation at REITs comparable to us in size and operation; CORPORATE INFORMATION FORM 10-K 28 (E) desire to provide executive compensation that is competitive with companies comparable to us in size and operation; and (F) consultation with an external advisor. We do not have formal guidelines or requirements for our senior executive officers as it pertains to stock or equity ownership in our company. Stock option and restricted Common Stock awards vary in size amongst our senior executives, including the Named Executives. Each stock option permits the recipient, generally for a period of ten years, to purchase one share of Common Stock at a price that is determined on the date that the stock option is awarded (i.e., the exercise price). Stock options granted to senior executive officers, including all of the Named Executives, vest and become exercisable in one-third installments over a period of three years beginning on the first anniversary of the grant date. The exercise price for the option awards granted during 2006 was determined by taking the average of the high and low selling price of the Common Stock on the NYSE on the trading day preceding the date on which the stock option was awarded. We grant stock options that are not immediately exercisable to our senior executive officers, including all of the Named Executives, and believe this is an optimal way to motivate them to focus their performance on the long-term goals of our company that will positively affect the value of the Common Share price and consequently the potential value of their option award. Restricted Common Stock awards are grants of Common Stock that have restrictions on the ability of the recipient to sell or transfer the Common Stock for a period of time following the grant date. In terms of outstanding equity awards held by the Named Executives, stock options constitute the majority of those awards because those were traditionally the only type of equity compensation that our company awarded. We began awarding restricted Common Stock in March 2005. We made this change to provide an appropriate incentive vehicle to retain critical executive talent in the organization and to make our incentive awards competitive with equity incentive awards provided by a majority of REITs comparable to us in size and operation. Similar to stock options, the restricted Common Stock grants that we award to our senior executive officers, including all of the Named Executives, have restrictions that lapse over time. We believe that structuring our Common Stock compensation in this manner will promote the same incentives and objectives of our executive compensation program that we attempt to further with our stock option grants. In 2006, we sought to heighten this incentive by extending the period of time in which restricted Common Stock would fully vest from three years to five years in order to provide a retention incentive for restricted Common Stock recipients that would benefit our Company and shareholders by increasing the time period between the grant date and the vesting of the restricted Common Stock award. The aggregate cost to us and fair value of our stock option and restricted Common Stock awards is reflected in the tables that follow and is based upon the application of Financial Accounting Standards Board Statement of Financial Accounting Standards 123 (revised 2004) (“FAS 123R”). FAS 123R requires us to measure the cost of an employee’s services rendered to our company in exchange for an equity award. This cost or expense for each Named Executive is listed in columns (d) and (e) of the Summary Compensation Table and represents the portion of awards the Named Executive received during 2006 and in previous years for which we recognized a compensation expense during 2006 for financial statement reporting purposes. The amount listed in column (d) of the Summary Compensation Table for each Named Executive represents the aggregate FAS 123R cost to us for a certain portion of the restricted Common Stock awards received by those persons during 2006 and 2005. The amount listed in column (e) of the Summary Compensation Table for each Named Executive represents the aggregate FAS 123R cost to us for a certain portion of option awards received by those persons during 2006 and 2005 and, for certain Named Executives, additional awards received during 2004 and 2003. Generally, the compensation cost of stock options and restricted Common Stock awards account for approximately 7% – 36% of a Named Executive’s total annual compensation that is reported in the Summary Compensation Table. We have disclosed the grant date fair value under FAS 123R of restricted Common Stock and option awards that the Named Executives received in 2006 in column (j) of the table entitled Grants of Plan Based Awards for 2006. Lastly, we recently adopted our 2007 Long Term Incentive Plan for Senior Executives (“LTIP”) under which senior executives, including the Named Executives, can qualify to receive performance share awards if we achieve certain results in our total shareholder return (“TSR”) over a three year period ending in 2009 and timely pay our quarterly dividends on the Common Shares during that three year period at dividend rates no lower than those paid during fiscal year 2006. The performance share allocation made under the LTIP is subject to the dividend requirement being approved at the Annual Meeting by our shareholders as a PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 29 PRESIDENT’S LETTER performance criterion for the performance shares. At the LTIP’s adoption, participating executives did not receive stock options and, generally, received restricted Common Stock at lower amounts than in previous years in consideration of the recipients also receiving an award opportunity with respect to the performance shares. The restricted Common Stock issued will vest over a five-year period in one-third annual installments beginning on the third anniversary of the grant date and each year thereafter until the fifth anniversary of the grant date. The LTIP does not reward performance during 2006 or any other prior year. Therefore, the tables that follow do not reflect awards or payouts pertaining to this plan. (iv) Retirement & Health Benefits Our retirement benefits are provided under our Retirement Savings Plan (the “Savings Plan”). The Savings Plan is a qualified deferred compensation plan or 401(k) plan. We match employee, including senior executive, contributions to the Savings Plan. During 2006, the Company matched 50% for the first 6% of salary deferrals that the employee contributed to the Savings Plan. During 2006, for Named Executives who participated, we provided matching contributions under the Savings Plan of $6,300 per person. We do not have a traditional pension plan or supplemental retirement plan. The health benefits that we provide senior executive officers are the same benefits generally available to all of our salaried employees in addition to our senior executive officers and participation is optional. (v) Perquisites & Other Compensation PROXY STATEMENT FORM 10-K We provide our senior executive officers with a limited number of perquisites that we believe are reasonable, competitive, and consistent with our overall philosophy of our executive compensation program to provide compensation arrangements that are comparable with those of our peer companies and that will attract and retain the best leaders for our company. We believe that the perquisites we provide to our senior executive officers can be utilized for Company business as well as personal development and growth. The primary perquisites that we provided to our senior executive officers, including the Named Executives, were: membership fees or dues for civic organizations, commercial associations, clubs, and participation in nonprofit organizations, lease payments for supplemental office space, and relocation expenses. The perquisite value (exclusive of matching Savings Plan contributions) included in column (g) of the Summary Compensation Table for Named Executives who received perquisites represents the aggregate incremental cost of the item(s) to us and, generally, does not exceed 11% of the respective Named Executive’s total annual compensation that is reported in the Summary Compensation Table. (vi) Change in Control Arrangements The principal goal of our senior executive officers is to build our company into a successful organization that optimizes the investment return for our shareholders. Therefore, we believe that it is important to protect our senior executives in the event of a change in control. Also, it is our belief that providing change in control agreements to our senior executive officers serves one of the chief objectives of our executive compensation program by aligning the motivations and interests of senior management with those of shareholders when change in control offers or transactions are considered. Moreover, we believe that providing change in control benefits and protections to senior executive officers serves to reassure them that they will not lose the benefit of the Company’s future profits if a change in control occurs that they otherwise would have expected to receive in the short term had the change in control not occurred. All of the Named Executives have change in control arrangements in the form of a Severance Benefits Agreement. Payments under our severance agreements are one-time lump sum payments and also include the continuation of health and other insurance benefits as well as the immediate vesting of all outstanding equity compensation held by the respective Named Executive. We also reimburse the Named Executives for certain taxes imposed as a result of the payment and receipt of severance benefits. All of the severance arrangements for the Named Executives occur following a single event, a change in the control of our company. We believe that establishing a single event for payment of benefits under our severance arrangements is consistent with achieving the objective stated above as well as furthering our overall compensation philosophy. Potential severance payments and arrangements for the Named Executives are discussed in greater detail in the section of this Proxy Statement entitled “Potential Payments to Named Executives Upon Termination or Change in Control.” CORPORATE INFORMATION 30 Market Comparisons & Benchmarking for Executive Compensation PRESIDENT’S LETTER The results of our company’s operating performance as well as individual performance are chiefly what our executive compensation program is designed to reward through the payment of salary, performance bonuses, equity awards, perquisites, and other benefits. Our Executive Compensation Committee attempts to set base salary and other award and benefit amounts at levels that are consistent with our overall compensation philosophy, objectives, and that are competitive with companies that are comparable to our company in size and operation. In determining executive compensation levels for 2006, the Executive Compensation Committee used its own review of executive compensation programs at REITs with operations similar to ours as well as data received from Hewitt. The data collected revealed that the 2005 salary compensation for our senior executive officers, including the Named Executives, was generally at the median level for companies within the 25th percentile of our peer group. The data also revealed that bonus opportunities for our senior executives were approximately half of prevailing market levels, so the Executive Compensation Committee changed the Executive Bonus Plan utilized in prior years by restructuring an executive’s bonus target under the plan to include bonus opportunities for individual achievement (30%) and corporate achievement (70%) instead of basing the bonus opportunity solely on corporate achievement. This restructuring is likely to increase an executive’s compensation under the Executive Bonus Plan. The peer group selected by the Executive Compensation Committee consisted of twenty-four companies comprised primarily of: (A) publicly held REITs operating in the retail shopping mall sector, (B) retail shopping REITs operating outside of the mall sector that are comparable to our company in size, and (C) REITs that compete with us for investment capital and executive talent. Below is a list of the companies that comprised the peer group: • Acadia Realty Trust • Colonial Properties Trust • Federal Realty Investment Trust • The Macerich Company • Pennsylvania Real Estate Investment Trust • Tanger Factory Outlet Centers, Inc. • Arden Realty, Inc.* • Crescent Real Estate Equities Company • General Growth Properties, Inc. • BRE Properties, Inc. • Developers Diversified Realty Corporation • Heritage Property Investment Trust, Inc.* • CBL & Associates Properties, Inc. • Equity One, Inc. • Kimco Realty Corp. PROXY STATEMENT FORM 10-K • The Mills Corporation • New Plan Excel Realty Trust, Inc. • Ramco-Gershenson Properties Trust • Regency Centers Corp. • Pan Pacific Retail Properties, Inc.* • Simon Property Group, Inc. • Taubman Centers, Inc. • United Dominion Realty • Weingarten Realty Trust, Inc. Investors *company acquired during 2006. Tax & Accounting Implications on Executive Compensation Section 162(m) of the Code imposes a $1,000,000 limit on a publicly traded company’s federal income tax deduction for non-performance based compensation paid during a tax year to persons who are covered by Section 162(m). It is the responsibility of the Executive Compensation Committee to address the issues raised by Section 162(m) with respect to the compensation paid to the Named Executives. At this time, it is not anticipated that any such non-deductible compensation will be material to the Company’s financial statements. The committee will continue to monitor the tax implications of executive compensation on the Company’s financial statements and will take appropriate action as warranted. CORPORATE INFORMATION 31 Summary Compensation Table & Other Supporting Tables PRESIDENT’S LETTER The following tables sets forth certain information with respect to the cash and other compensation paid or accrued by the Company for its Chief Executive Officer, Chief Financial Officer, the three other most highly compensated executive officers who were serving as executive officers at the end of 2006, and one other former executive officer for whom disclosure is also required (collectively, the “Named Executives”). SUMMARY COMPENSATION TABLE Name and Principal Position Year Salary ($) Stock awards(1) ($) Option awards(2) ($) Non-equity incentive plan compensation(3) ($) (f) All other compensation ($) Total(4) ($) (a) (b) (c) (d) (e) (g) (h) PROXY STATEMENT Michael P. Glimcher President and Chief Executive Officer Mark E. Yale Executive Vice President, Chief Financial Officer, and Treasurer Marshall A. Loeb Executive Vice President and Chief Operating Officer George A. Schmidt Executive Vice President and Chief Investment Officer Thomas J. Drought, Jr. Senior Vice President, Director of Leasing Robert F. Beffa Senior Vice President, Development and Construction(10) 2006 $497,280 $285,833 $96,924 $132,800(5) $33,100(6) $1,045,937 2006 $267,200 $70,682 $20,413 $36,900(5) $6,300(7), (8) $401,495 2006 $359,692 $97,718 $13,637 $52,900(5) $6,300(7), (8) $530,247 2006 $305,360 $98,468 $36,397 $39,400(5) $0(7) $479,625 FORM 10-K 2006 $284,641 $11,599 $18,183 $26,000(5) $6,300(7), (8) $346,723 2006 $334,000 $23,695 $6,417 $0 $44,345(9) $408,457 CORPORATE INFORMATION (1) The value represented for each Named Executive is the aggregate compensation expense for such person’s restricted Common Stock awards recognized by our company during 2006, which include awards granted prior to 2006, for financial statement reporting purposes as computed in accordance with FAS 123R. The method used in determining the listed valuations is provided in Part III of the Company’s Form 10-K for the fiscal year ended December 31, 2006 in Item 15 entitled Exhibits and Financial Statement Schedules in note 14 of the notes to consolidated financial statements. (2) The value represented for each Named Executive is the aggregate compensation expense for such person’s stock options awards recognized by our company during 2006, which include awards granted prior to 2006, for financial statement reporting purposes as computed in accordance with FAS 123R. The assumptions used in determining the listed valuations are provided in Part III of the Company’s Form 10-K for the fiscal year ended December 31, 2006 in Item 15 entitled Exhibits and Financial Statement Schedules in note 15 of the notes to consolidated financial statements. 32 (3) The amounts represent cash awards granted to the respective Named Executive pursuant to the terms of our 2006 Executive Bonus Plan. (4) For each respective Named Executive, the amount listed represents the aggregate total of the amounts listed in columns (c) through (g). (5) Represents the aggregate total of the respective Named Executive’s FFO Target and Individual Objectives Target. Each individual received 25% of their respective FFO Target and between 85%-105% of their respective Individual Objectives Target. Actual awards are stated to the nearest hundredth. (6) The amount listed represents: (i) a matching contribution of $6,300 made or credited by the Company for fiscal year 2006 under the Savings Plan and (ii) the aggregate incremental cost to the Company of providing reimbursement of dues for a membership in a commercial association ($2,500), membership dues for a three year club membership ($7,000), and membership dues and related expenses for participation in civic associations ($17,300). The methodology used by the Company to determine the aggregate incremental cost for the expenditures listed in (ii) was the actual invoice cost. PRESIDENT’S LETTER PROXY STATEMENT (7) The total value of all perquisites and other personal benefits received by the respective Named Executive during the fiscal year ended December 31, 2006 was less than $10,000. (8) The amount listed represents a matching contribution of $6,300 made or credited by the Company for fiscal year 2006 under the Savings Plan. (9) The amount listed represents: (i) the aggregate incremental cost to the Company for relocation expenses of $28,093 paid to Mr. Beffa in connection with his resignation and (ii) the aggregate incremental cost to the Company of $16,252 to lease supplemental office space for use by Mr. Beffa. The methodology used by the Company to determine the aggregate incremental cost for the expenditures listed in (i) and (ii) was the actual invoice cost. (10) Mr. Beffa resigned from the Company effective December 31, 2006. Mr. Beffa forfeited 25,000 stock options and 8,334 restricted Common Shares in connection with his resignation. The Summary Compensation Table above reflects for each Named Executive the payments for 2006 of the primary elements of executive compensation that we discussed in the Compensation Discussion and Analysis section of this Proxy Statement. As indicated earlier, salary is the element of compensation that comprises the majority of each Named Executive’s total compensation. With respect to restricted Common Stock and option awards, the values listed in columns (d) and (e) represent the aggregate compensation expense that we incurred in 2006 for each person’s respective award(s). The dollar amounts listed in column (d) pertain to restricted Common Stock awards and represent the aggregate value of a pro rata portion of the total award received by the Named Executive during 2005 and 2006 multiplied by the intrinsic value assigned that portion of the respective award under FAS 123R. These intrinsic values ranged from $23.70 to $25.22 per Common Share. With respect to the option awards, the dollar amounts listed for each Named Executive represent the aggregate value of option awards that vested during 2006 and were assigned values for each vested portion under FAS 123R (using the Black-Scholes option pricing model). These values ranged from $0.44 to $1.43 per option. As for bonus awards under our 2006 Executive Bonus Plan, all of the Named Executives achieved between Target and Excellence on their respective performance evaluations and were eligible to receive between 85%-105% of their respective Individual Objectives Target. As for the FFO Component of the bonus payment under the 2006 Executive Bonus Plan, it was determined that the minimum FFO target under the 2006 Executive Bonus Plan was not achieved; however, the Executive Compensation Committee conducted an evaluation of our year-end FFO performance and took into consideration the impact of extraordinary one-time events that adversely affected our year-end FFO results despite significant individual achievement by the Named Executives. Based upon this evaluation and in light of the individual performance of the Named Executives, the Executive Compensation Committee decided to authorize a payment under the FFO Component of the 2006 Executive Bonus Plan that amounted to 25% of each Named Executive’s FFO Target. FORM 10-K CORPORATE INFORMATION 33 PRESIDENT’S LETTER GRANTS OF PLAN-BASED AWARDS FOR 2006 The following table sets forth certain information concerning grants of cash and non-cash awards made to each of the Named Executives under the Company’s equity and non-equity compensation plans during the fiscal year ended December 31, 2006. None of the Named Executives have transferred any of the awards that they received during the fiscal year ended December 31, 2006. Estimated possible payouts under nonequity incentive plan awards (1) Maximum Target Threshold ($) ($) ($) Name Grant Date PROXY STATEMENT All other stock awards: Number of shares of stock or units (#)(2) All other option awards: Number of securities underlying options (#)(2) Exercise or base price of option awards ($/Sh) (3) Grant date Grant date fair closing value of stock and market price option awards(4) of securities underlying option awards (a) Michael P. Glimcher (b) 5/5/2006 (c) $13,426 (d) $298,368 (e) $425,174 (f) 25,000 (g) 75,000 (h) $25.22 (i) $26.10 (j) Stock – $652,500 Options – $76,500 Mark E. Yale 5/5/2006 $2,576 $80,160 $114,228 8,333 25,000 $25.22 $26.10 Stock – $217,491 Options – $25,500 FORM 10-K Marshall A. Loeb 5/5/2006 $3,035 $107,908 $153,769 8,333 25,000 $25.22 $26.10 Stock – $217,491 Options – $25,500 George A. Schmidt 5/5/2006 $2,576 $91,608 $130,541 8,333 25,000 $25.22 $26.10 Stock – $217,491 Options – $25,500 Thomas J. Drought, Jr. 5/5/2006 $2,562 $56,928 $81,122 3,333 10,000 $25.22 $26.10 Stock – $86,991 Options – $10,200 Robert F. Beffa 5/5/2006 $0(5) $0(5) $0(5) 5,000(6) 15,000(7) $25.22 $26.10 Stock – $130,500 Options – $15,300 CORPORATE INFORMATION (1) Amounts represent possible cash payouts to the respective Named Executive pursuant to the terms of our 2006 Executive Bonus Plan. Actual payouts under the 2006 Executive Bonus Plan are reported in column (f) of the Summary Compensation Table. (2) Amounts represent stock option or restricted Common Stock grants from the 2004 Plan to the listed Named Executive. (3) The exercise price for the option awards granted was determined by taking the average of the high and low selling price of the Common Stock on the NYSE on the trading day preceding the date on which the stock option was awarded. (4) The value represented is the grant date fair value of the restricted Common Stock and stock options awarded to the respective Named Executive computed in accordance with FAS 123R. 34 (5) Mr. Beffa became ineligible for a bonus payout under the 2006 Executive Bonus Plan upon his resignation from the Company as its Senior Vice President, Development and Construction. (6) The Common Shares represented by this award were forfeited by Mr. Beffa in connection with his resignation from the Company as its Senior Vice President, Development and Construction. (7) The stock options represented by this award were forfeited by Mr. Beffa in connection with his resignation from the Company as its Senior Vice President, Development and Construction. The disclosures contained in the two preceding tables represent both cash and equity compensation. Each Named Executive’s cash compensation is comprised of annual salary and an annual bonus payment from our 2006 Executive Bonus Plan. Generally, a Named Executive’s aggregate salary and bonus amounts account for approximately 59%-89% of the individual’s total compensation. Restricted Common Stock and option awards were made from our 2004 Plan. The 2004 Plan is our equity compensation plan from which we issue our stock options and restricted Common Stock. All of the Named Executives receive regular dividends on the restricted Common Stock during 2006 at the same dividend rate as all other common shareholders. PRESIDENT’S LETTER PROXY STATEMENT The restricted Common Stock and stock option grants have service-based conditions related to their vesting in that the stock options become exercisable and the restrictions on the Common Shares lapse over a predetermined period of time, provided the Named Executive remains employed by our company. The stock options awarded to each of the Named Executives are exercisable in three equal annual installments beginning one year after the grant date. The restrictions on the Common Stock awards received by each of the Named Executives lapse in three equal annual installments over a period of five years beginning on the third anniversary of the grant date. Restricted Common Stock and unexercisable stock options have forfeiture provisions that are triggered if the Named Executive is no longer employed with our company. The range of payments listed in columns (c) through (e) in the Grants of Plan Based Awards for 2006 table for each of the Named Executives represents the estimated possible bonus payment amounts under the 2006 Executive Bonus Plan that a respective Named Executive would be eligible for under the following circumstances: Threshold* Target Maximum The Company’s FFO performance is evaluated at the minimum level and the individual obtains threshold achievement on only one individual objective. FORM 10-K The Company’s FFO performance is evaluated at target and the individual obtains target achievement on all individual objectives. The Company’s FFO performance is evaluated as excellent and the individual achieves excellence on all individual objectives. *Under the 2006 Executive Bonus Plan, the Named Executives had the following number of individuals objectives: A) CEO and SVPLeasing – 5 objectives apiece, B) CFO – 7 objectives, C) COO – 8 objectives, and D) CIO – 8 objectives. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION 35 PRESIDENT’S LETTER OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2006 The following table sets forth certain information, on an award-by-award basis, concerning unexercised options to purchase Common Shares and unvested restricted Common Stock that are held by each Named Executive and outstanding as of December 31, 2006. None of the Named Executives have transferred any of the awards that are reported in the table below. Name Number of Securities Underlying Unexercised Options (#) Exercisable Option Awards Number of Option Securities Exercise Underlying Price Unexercised ($) Options (#) Unexercisable (c) (d) Option Expiration Date Stock Awards Number Market Value of of Shares Shares or Units of Stock That Have or Units Not Vested of Stock ($) That Have Not Vested (#) (f) (g) PROXY STATEMENT (a) Michael P. Glimcher Awards May 29, 1998 Award March 5, 2002 Award March 11, 2003 Award March 12, 2004 Award May 10, 2004 Award March 9, 2005 Award March 31, 2005 Award May 5, 2006 Award Mark E. Yale Awards September 8, 2004 Award March 9, 2005 Award May 6, 2005 Award May 5, 2006 Award (b) (e) 30,000 25,000 75,000 65,323 18,010 25,000 N/A 0 0 0 0 32,662(1) 9,005(1) 50,000(1) N/A 75,000(1) $20.50 $17.61 $18.93 $26.69 $19.56 $25.67 N/A $25.22 May 28, 2008 March 4, 2012 March 10, 2013 March 11, 2014 May 9, 2014 March 8, 2015 N/A May 4, 2016 N/A N/A N/A N/A N/A N/A 16,667(1) 25,000(1) N/A N/A N/A N/A N/A N/A $445,176(2) $667,750(2) FORM 10-K 13,333 5,000 N/A 0 6,667(3) 10,000(3) N/A 25,000(3) $25.61 $25.67 N/A $25.22 September 7, 2014 March 8, 2015 N/A May 4, 2016 N/A N/A 3,334(3) 8,333(3) N/A N/A $89,051(2) $222,574(2) Marshall A. Loeb Awards May 16, 2005 Award May 5, 2006 Award 8,333 0 16,667(4) 25,000(4) $24.74 $25.22 May 15, 2015 May 4, 2016 5,556(4) 8,333(4) $148,401(2) $222,574 (2) (1) The vesting dates for Mr. Glimcher’s unexercisable stock options and unvested restricted Common Stock are as follows: (i) for the March 12, 2004 Award – March 12, 2007, (ii) for the May 10, 2004 Award – May 10, 2007, (iii) for the March 9, 2005 Award – March 9, 2007 and March 9, 2008, (iv) for the March 31, 2005 Award – March 31, 2007 and March 31, 2008, (v) for the May 5, 2006 Award (options) – May 5, 2007, May 5, 2008, and May 5, 2009, and (vi) for the May 5, 2006 Award (stock) – May 5, 2009, May 5, 2010, and May 5, 2011. CORPORATE INFORMATION (2) Amount represents the aggregate market value of the unvested restricted Common Shares held by the respective Named Executive for the particular restricted Common Stock award listed as computed by multiplying the Common Share’s closing market price as listed on the NYSE as of December 29, 2006 of $26.71 by the number of unvested restricted Common Shares listed in the adjacent column for the particular award. (3) The vesting dates for Mr. Yale’s unexercisable stock options and unvested restricted Common Stock are as follows: (i) for the September 8, 2004 Award – September 8, 2007, (ii) for the March 9, 2005 Award – March 9, 2007 and March 9, 2008, (iii) for the May 6, 2005 Award – May 6, 2007 and May 6, 2008, (iv) for the May 5, 2006 Award (options) – May 5, 2007, May 5, 2008, and May 5, 2009, and (v) for the May 5, 2006 Award (stock) – May 5, 2009, May 5, 2010, and May 5, 2011. (4) The vesting dates for Mr. Loeb’s unexercisable stock options and unvested restricted Common Stock are as follows: (i) for the May 16, 2005 Award (stock and options) – May 16, 2007 and May 16, 2008, (ii) for the May 5, 2006 Award (options) – May 5, 2007, May 5, 2008, and May 5, 2009, and (iii) for the May 5, 2006 Award (stock) – May 5, 2009, May 5, 2010, and May 5, 2011. 36 PRESIDENT’S LETTER Name OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END 2006 (cont’d) Option Awards Number of Option Number of Option Exercise Securities Securities Price Expiration Date Underlying Underlying ($) Unexercised Options Unexercised Options (#) (#) Exercisable Unexercisable Stock Awards Market Value Number of Shares of Shares or Units of Stock or Units That Have Not of Stock Vested That Have ($) Not Vested (#) (f) (g) (a) George A. Schmidt Awards May 29, 1998 Award March 7, 2001 Award March 5, 2002 Award March 11, 2003 Award March 12, 2004 Award May 10, 2004 Award March 9, 2005 Award May 6, 2005 Award May 5, 2006 Award Thomas J. Drought, Jr. Awards March 9, 2000 Award March 11, 2003 Award March 12, 2004 Award May 10, 2004 Award March 9, 2005 Award May 5, 2006 Award Robert F. Beffa Awards August 17, 2005 Award May 5, 2006 Award (b) (c) (d) (e) 20,000 34,647 30,000 50,000 26,129 7,204 8,334 N/A 0 0 0 0 0 13,065(5) 3,602(5) 16,666(5) N/A 25,000(5) $20.50 $14.75 $17.61 $18.93 $26.69 $19.56 $25.67 N/A $25.22 May 28, 2008 March 6, 2011 March 4, 2012 March 10, 2013 March 11, 2014 May 9, 2014 March 8, 2015 N/A May 4, 2016 N/A N/A N/A N/A N/A N/A N/A 5,556(5) 8,333(5) N/A N/A N/A N/A N/A N/A N/A $148,401(2) $222,574(2) PROXY STATEMENT 1,534 13,333 10,452 2,881 6,666 0 0 0 5,226(6) 1,441(6) 13,334(6) 10,000(6) $12.28 $18.93 $26.69 $19.56 $25.67 $25.22 March 8, 2010 March 10, 2013 March 11, 2014 May 9, 2014 March 8, 2015 May 4, 2016 N/A N/A N/A N/A N/A 3,333(6) N/A N/A N/A N/A N/A $89,024(2) FORM 10-K 0 0 10,000(7) 15,000(7) $24.80 $25.22 August 16, 2015 May 4, 2016 3,334(8) 5,000(8) $0(8) $0(8) (5) The vesting dates for Mr. Schmidt’s unexercisable stock options and unvested restricted Common Stock are as follows: (i) for the March 12, 2004 Award – March 12, 2007, (ii) for the May 10, 2004 Award – May 10, 2007, (iii) for the March 9, 2005 Award – March 9, 2007 and March 9, 2008, (iv) for the May 6, 2005 Award – May 6, 2007 and May 6, 2008, (v) for the May 5, 2006 Award (options) – May 5, 2007, May 5, 2008, and May 5, 2009, and (vi) for the May 5, 2006 Award (stock) – May 5, 2009, May 5, 2010, and May 5, 2011. (6) The vesting dates for Mr. Drought’s unexercisable stock options and unvested restricted Common Stock are as follows: (i) for the March 12, 2004 Award – March 12, 2007, (ii) for the May 10, 2004 Award – May 10, 2007, (iii) for the March 9, 2005 Award – March 9, 2007 and March 9, 2008, (iv) for the May 5, 2006 Award (options) – May 5, 2007, May 5, 2008, and May 5, 2009, and (v) for the May 5, 2006 Award (stock) – May 5, 2009, May 5, 2010, and May 5, 2011. (7) Mr. Beffa’s unvested stock options were forfeited in connection with his December 31, 2006 resignation from the Company as its Senior Vice President, Development and Construction. (8) Mr. Beffa’s unvested restricted Common Shares were forfeited in connection with his December 31, 2006 resignation from the Company as its Senior Vice President, Development and Construction. CORPORATE INFORMATION 37 PRESIDENT’S LETTER OPTION EXERCISES AND STOCK VESTED DURING THE YEAR 2006 The following table sets forth certain information concerning each exercise of options to purchase Common Stock and each vesting of restricted Common Stock held by each of the Named Executives during the fiscal year ended December 31, 2006. Name Option Awards Value Number of Shares Acquired on Exercise Realized on (#) Exercise ($) (b) (c) Stock Awards Number of Value Realized Shares Acquired on on Vesting Vesting ($) (#) (d) (e) (a) Michael P. Glimcher PROXY STATEMENT 0 0 0 6,853 6,667 5,000 $0 $0 $0 $67,446(1) $65,537(1) $10,303(1) 8,333 1,666 2,777 2,777 N/A 1,666 $236,657(2) $43,483(2) $70,980(2) $72,480(2) N/A $40,184(2) Mark E. Yale Marshall A. Loeb George A. Schmidt Thomas J. Drought, Jr. Robert F. Beffa FORM 10-K (1) Represents the aggregate dollar value realized by the respective Named Executive upon exercise of the listed options as determined by taking the difference between the market price of the Common Shares underlying the listed options (computed using the closing market price of the Common Shares as listed on the NYSE on the respective exercise date) and the exercise price of the respective options. (2) Represents the aggregate dollar value realized upon the lapse of the transfer restrictions (i.e., vesting) of the listed Common Shares as determined by multiplying the number of shares listed in the adjacent column for the respective Named Executive by the market value of the shares on the respective vesting date (computed using the closing market price of the Common Shares as listed on the NYSE as of the respective vesting date). REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION 38 Potential Payments to Named Executives Upon Termination or Change in Control Severance Benefits Agreements The Company and Glimcher Properties Limited Partnership (“GPLP”) have entered into Severance Benefits Agreements with each of the Named Executives (the “Severance Agreements”). For purposes of the discussion in this section, the Company, GPLP, their affiliates and subsidiaries (including entities in which the Company or GPLP own a majority of any non-voting stock) shall be referred to collectively as the “Corporation.” Under the Severance Agreements, GPLP is required to make certain lump sum severance payments and the Corporation is to provide certain health benefits in the event of a change in control of the Company (a “Change in Control”). The Severance Agreements do not cover and are not applicable to the following situations: • • • • the termination of the respective Named Executive’s employment (with or without cause); the constructive termination of the respective Named Executive’s employment; the resignation of the respective Named Executive; or a change in the job responsibilities of the respective Named Executive. PRESIDENT’S LETTER PROXY STATEMENT Definition of a “Change in Control” under the Severance Agreements Under the Severance Agreements, a Change in Control occurs if any of the three circumstances described in (i), (ii), or (iii) listed below occur: (i) there is a change in control in the Company that must be publicly disclosed by the Company in a proxy statement under the rules of the Exchange Act and the Named Executive is not: (A) the other party in the change of control transaction; (B) an executive officer, trustee, director or more than 5% stockholder of a company that is the other party in the change of control transaction; or (C) an executive officer, trustee, director or more than 5% stockholder of a company that controls another company that is the party in the change of control transaction; (ii) the Company merges or consolidates with, or sells all or substantially all of its assets to, another company (each, a “Transaction”); provided, however, that a Transaction shall not be deemed to result in a Change in Control if: (A) immediately prior to the Transaction, the circumstances described in (i)(A) or (i)(B) above exist; or (B) (I) the shareholders of the Company, immediately before such transaction, own, directly or indirectly, immediately following such Transaction in excess of fifty percent (50%) of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Transaction (the “Surviving Corporation”) in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Transaction; and (II) the individuals who were members of the Company’s Board of Trustees immediately prior to the execution of the agreement providing for such Transaction, constitute at least a majority of the members of the board of directors or the board of trustees, as the case may be, of the Surviving Corporation, or of a corporation or other entity beneficially, directly or indirectly, owning a majority of the outstanding voting securities of the Surviving Corporation; or (iii) the Company acquires assets of another company or a subsidiary of the Company merges or consolidates with another company (each an “Other Transaction”) and: FORM 10-K CORPORATE INFORMATION 39 (A) the shareholders of the Company, immediately before such Other Transaction own, directly or indirectly, immediately following such Other Transaction fifty percent (50%) or less of the combined voting power of the outstanding voting securities of the corporation or other entity resulting from such Other Transaction (the “Other Surviving Corporation”) in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Other Transaction; or (B) the individuals who were members of the Company’s Board of Trustees immediately prior to the execution of the agreement providing for such Other Transaction constitute less than a majority of the members of the board of directors or board of trustees, as the case may be, of the Other Surviving Corporation, or of a corporation or other entity beneficially, directly or indirectly, owing a majority of the outstanding voting securities of the Other Surviving Corporation; provided, however, that an Other Transaction shall not be deemed to result in a Change in Control of the Company if immediately prior thereto the circumstances in (i)(A) or (i)(B) above exist. Conditions for Payment and the Receipt of Benefits Under the Severance Agreements Upon the occurrence of a Change in Control, and if certain conditions are satisfied, the Named Executive is eligible to receive a lump sum severance payment as quantified in Table A below and, for a period of eighteen (18) months following a Change in Control, the Corporation shall maintain in full force and effect all life, accident, medical, and dental insurance benefit plans and programs or arrangements in which the Named Executive was entitled to participate immediately prior to the date of the Change in Control. Additionally, the Named Executive would be entitled to receive from GPLP reimbursements for any excise taxes on any payments received under the Severance Agreement as well as any income taxes due on account of the reimbursement and any legal fees incurred during any dispute over the Severance Agreement in which a judgment was rendered in favor of the Named Executive. The conditions that determine if a Named Executive is eligible to receive the aforementioned payments and benefits are as follows: (i) the Named Executive must be an employee of the Corporation immediately prior to a Change in Control; with respect to the provision of the health benefits described above, the general terms and provisions of the respective insurance benefit plan or program must permit the continued participation of the Named Executive following a Change in Control; and FORM 10-K PROXY STATEMENT PRESIDENT’S LETTER (ii) (iii) with respect to the provision of the health benefits described above, if the Named Executive becomes employed by any third party during the eighteen (18) month period following the Change in Control, then after the commencement date of such employment, the Named Executive shall no longer be entitled to any accident, medical, and dental insurance provided under the respective Severance Agreement. The Severance Agreements provide that in the event that a Named Executive is not permitted to participate in any insurance benefit plan or program covered under the Severance Agreement, then the Company and GPLP shall provide or arrange for the Named Executive to receive any life, accident, medical, and dental insurance benefits substantially similar to those which the Named Executive was entitled to receive under the insurance benefit plan or program covered under the Severance Agreement. Furthermore, at the end of the eighteen (18) month coverage period, the Named Executive has the option to have any assignable insurance policy relating to the respective Named Executive that is owned by the Company assigned to the respective Named Executive at no cost and with no apportionment of prepaid insurance premiums, provided the terms of the policy permit the assignment and the Named Executive has not been employed by a third party. The Severance Agreements do not require the Named Executives to seek employment following a Change in Control in order to mitigate or lessen the amount of any payment that the Corporation must make following a Change in Control. Also, the Severance Agreements do not require that payments made or benefits provided to a Named Executive following a Change in Control be reduced by any compensation CORPORATE INFORMATION 40 earned by the respective Named Executive from employment obtained following the Change in Control or by benefits received after the date of termination, except as required by the respective Severance Agreement. Determining the Amount of Payments and Health Benefits Received Under the Severance Agreements Upon the occurrence of a Change in Control and if the conditions described above are satisfied then the Named Executive shall be entitled to the following: (i) any repurchase and forfeiture restrictions on all restricted Common Shares held by the Named Executive shall lapse and options to purchase Common Shares granted to the Named Executive shall vest on the day immediately prior to the date of a Change in Control; a lump sum severance payment from GPLP in the amount of 2-3 times (depending on the Named Executive) the sum of: (A) all base salary and bonuses paid or payable to the Named Executive by the Corporation in the year preceding the calendar year in which the Change in Control occurred, (B) the grant date fair market value of all restricted Common Shares awarded to the Named Executive in the year preceding the calendar year in which the Change in Control occurred (such amount is determined based upon the average of the high and low selling price of the Common Shares on the NYSE for the trading day preceding the grant date), and (C) the fair market value of any property or rights given or awarded to the Named Executive by the Corporation in the year preceding the calendar year in which the Change in Control occurred or such partial first year of employment, as applicable; PRESIDENT’S LETTER (ii) PROXY STATEMENT (iii) the continued benefit from the Corporation of all life, accident, medical, and dental insurance benefit plans and programs or arrangements in which the Named Executive was entitled to participate immediately prior to the date of the Change in Control for a period of eighteen (18) months following the Change in Control; (iv) payment from GPLP equal to all taxes payable by the Named Executive under Section 4999 of the Code for payments received by the Named Executive under the Severance Agreement that are considered “excess parachute payments” as that term is defined by Section 280G(b)(i) of the Code; (v) a payment from GPLP equal to all federal, state, and local income taxes on the payments described above in (iv) that the Named Executive may be responsible for; and FORM 10-K (vi) the payment or reimbursement from GPLP of all legal fees and related expenses paid by the Named Executive as a result of: (A) the Named Executive seeking to obtain or enforce any right or benefit provided by the respective Severance Agreement or (B) any action taken by the Corporation against the Named Executive in enforcing the rights of the Corporation under the respective Severance Agreement, provided, in each case, that a final judgment has been rendered in favor of the Named Executive and all legal appeals have been exhausted. CORPORATE INFORMATION REMAINDER OF PAGE INTENTIONALLY LEFT BLANK 41 Table A below illustrates for each Named Executive the various amounts used to determine what each person’s estimated severance payment would be as well as the estimated value of certain health benefits and tax payments that GPLP and the Corporation would provide to each of the Named Executives under the Severance Agreements if a Change in Control occurred on December 29, 2006 when the closing market price of the Company’s Common Stock was $26.71 per share. Below in Table B for each of the Named Executives is the aggregate number and value of stock options and restricted Common Stock that would vest under the Severance Agreements if a Change in Control occurred on December 29, 2006. TABLE A — DETERMINATION OF ESTIMATED SEVERANCE PAYMENTS, TAX PAYMENTS, & BENEFITS TO THE NAMED EXECUTIVES UNDER THE SEVERANCE AGREEMENTS(1), (2) Name Salary(3) Michael P. Glimcher $475,314 $216,000 $596,500 Mark E. Yale $257,500 $51,500 $125,050 Marshall A. Loeb $218,750 $79,000 $206,158 George A. Schmidt $294,580 $66,000 $208,408 Thomas J. Drought, Jr. $274,242 $67,431 N/A Robert F. Beffa(9) N/A N/A N/A PROXY STATEMENT PRESIDENT’S LETTER Bonus (3) Fair Market Value of Restricted Common Stock Grants(4) Fair Market Value of Stock Option Grants(5) Fair Market Value of Other Property Received Subtotal Severance Multiplier Estimated Severance Payment (product of Subtotal multiplied by Severance Multiplier) Estimated Tax Related Payments Estimated Value of Health Benefits(8) Total Estimated Severance-Related Payments & Benefits $81,750 $6,300(6) $1,375,864 3x $4,127,592 $16,350 $897(6) $451,297 3x $1,353,891 $24,000 $6,300(6) $534,208 3x $1,602,624 $27,250 N/A $596,238 3x $1,788,714 $21,800 $6,300(6) $369,773 2x $739,546 N/A N/A N/A N/A N/A FORM 10-K $2,131,791 $15,166 $677,814 $13,805 $751,819 $14,353 $891,616 $14,030 $0(7) $13,909 N/A N/A $6,274,549 $2,045,510 $2,368,796 $2,694,360 $753,455 N/A CORPORATE INFORMATION (1) The estimated severance payments, tax-related payments, and values for health benefits are provided under the following assumptions: (i) the Change in Control is uncontested and not the subject of a dispute, (ii) the status of the Named Executive’s employment with the Company prior to or following the Change in Control is not disputed, (iii) there is no dispute as to the operation, applicability, interpretation, or validity of any aspect of the subject Severance Agreements, (iv) the amounts provided represent our costs as of December 29, 2006 to provide the respective health benefits to the listed Named Executives, and (v) there is no dispute as to our methodology used to determine the payment amount or value of the respective payment or benefit. Variances in these assumptions could cause the amounts listed for one or more of the Named Executives in the “Estimated Severance Payment,” “Estimated Tax Related Payments,” “Estimated Value of Health Benefits,” or “Total Estimated Severance-Related Payments & Benefits” rows to change. (2) The total value of all perquisites and other personal benefits received by the respective Named Executive as part of the payments under the respective Severance Agreement is less than $10,000. (3) Represents amounts received during fiscal year 2005. 42 (4) Listed value is the aggregate fair market value of the restricted Common Shares awarded to the Named Executive during 2005 (such value is determined by multiplying the aggregate number of restricted Common Shares awarded to the respective Named Executive by the average of the high and low selling price of the Common Shares on the NYSE for the trading day preceding the grant date). (5) Includes the value of stock options awarded to the Named Executive during 2005 (such value is determined by multiplying the aggregate number of stock options awarded to the respective Named Executive during 2005 by the grant date fair value of a stock option as determined under FAS 123R). (6) Represents the matching contributions made or credited by the Company for fiscal year 2005 under the Savings Plan. (7) Mr. Drought’s estimated severance payment does not qualify as an excess parachute payment under Section 280G(b)(i) of the Code, and, therefore, his estimated severance payment would not be subject to tax under Section 4999 of the Code. (8) The assumptions used to quantify the estimated value of the health care benefits provided are those used for financial reporting purposes under GAAP. (9) Mr. Beffa’s Severance Agreement was terminated in connection with his resignation. TABLE B —AMOUNT & VALUE OF VESTING STOCK OPTIONS & RESTRICTED COMMON STOCK FOR THE NAMED EXECUTIVES UNDER THE SEVERANCE AGREEMENTS Name Amount of Stock Options Vesting Upon a Change in Control 166,667 PRESIDENT’S LETTER PROXY STATEMENT Value of In-theMoney Options(1) Amount of Restricted Common Stock Vesting Upon a Change in Control 41,667 Value Realized on Vesting of Restricted Common Stock(2) Michael P. Glimcher Mark E. Yale Marshall A. Loeb George A. Schmidt Thomas J. Drought, Jr. Robert F. Beffa $228,789 $1,112,926 FORM 10-K 41,667 $54,984 11,667 $311,626 41,667 $70,084 13,889 $370,975 58,333 $80,598 13,889 $370,975 30,001 N/A(3) $39,175 3,333 N/A(3) $89,024 N/A N/A CORPORATE INFORMATION (1) Stock options are in-the-money if the fair market value of the underlying securities exceeds the exercise price of the stock option. The values listed represent the difference between the fair market value of the Common Shares underlying the stock options (computed using the closing market price of $26.71 for the Common Shares as listed on the NYSE as of December 29, 2006) and the exercise price of the stock options (the exercise price of the outstanding stock options for each of the listed Named Executives at December 29, 2006 is reported in this Proxy Statement in the table entitled “Outstanding Equity Awards at Fiscal Year-End 2006”). (2) The values listed were determined by multiplying the number of shares listed in the adjacent column for the respective Named Executive by the fair market value of the Common Shares (computed using the closing market price of $26.71 for the Common Shares as listed on the NYSE as of December 29, 2006). (3) Mr. Beffa’s Severance Agreement was terminated in connection with his resignation and all of his unvested stock options and restricted Common Stock were forfeited in connection with his resignation. 43 Trustee Compensation PRESIDENT’S LETTER The following table sets forth certain information with respect to the cash and other compensation paid or accrued by the Company for services rendered by the persons serving on the Board of Trustees during the fiscal year ended December 31, 2006. TRUSTEE COMPENSATION TABLE FOR THE YEAR 2006 Name Fees Earned or Paid in Cash ($) (b) Option Awards(1), (2) ($) (c) All Other Compensation ($) (d) (6) Total(3) ($) (e) (a) David M. Aronowitz Philip G. Barach PROXY STATEMENT $24,000(4) $60,000 $84,000 $57,000 $71,000 $48,000 $67,000 $100,000(7) $0 $3,069(5) $3,069(5) $3,069(5) $3,069(5) $3,069(5) $3,069(5) $65,469(5), (8) $24,000 $63,069 $87,069 $60,069 $74,069 $51,069 $70,069 $534,179 (6) Wayne S. Doran Howard Gross Niles C. Overly Alan R. Weiler William S. Williams Herbert Glimcher (6) (6) (6) (6) (6) $368,710(9) (1) The value listed in column (c) for each named trustee is the aggregate compensation expense for such trustee’s stock option holdings recognized by our company during 2006 for financial statement reporting purposes as computed in accordance with FAS 123R. The aggregate compensation expense recognized by our company under FAS 123R during 2006 for financial statement reporting purposes for the stock option awards received by Mr. Michael P. Glimcher, a Class II Trustee, is reported in this Proxy Statement in the Summary Compensation Table. The assumptions used in determining the listed valuations are provided in Part III of the Company’s Form 10-K for the fiscal year ended December 31, 2006 in Item 15 entitled Exhibits and Financial Statement Schedules in note 15 of the notes to consolidated financial statements. (2) The following are the aggregate number of stock option awards outstanding for the respective trustees listed above as of the end of fiscal year 2006: (i) Mr. David M. Aronowitz had no stock option awards outstanding, (ii) Mr. Philip G. Barach had 9,000 stock option awards outstanding, (iii) Mr. Wayne S. Doran had 21,000 stock option awards outstanding, (iv) Mr. Herbert Glimcher had 962,666 stock option awards outstanding, (v) Mr. Howard Gross had 6,000 stock option awards outstanding, (vi) Mr. Niles C. Overly had 6,000 stock option awards outstanding, (vii) Mr. Alan R. Weiler had 9,000 stock option awards outstanding, and (viii) Mr. William S. Williams had 6,000 stock option awards outstanding. The aggregate Common Stock awards and option awards held by Mr. Michael P. Glimcher, a Class II Trustee, at the end of fiscal year 2006 is reported in this Proxy Statement in the table entitled “Outstanding Equity Awards at Fiscal Year-End 2006.” (3) For each respective trustee, the amount listed represents the aggregate total of the amounts listed in columns (b) through (d). (4) Fees for services rendered from May 5, 2006 to December 31, 2006. (5) Each of the named trustees received 3,000 stock options during fiscal year 2006. The grant date fair value of each trustee’s stock option award was $3,069 pursuant to FAS 123R. The grant date fair CORPORATE INFORMATION FORM 10-K 44 value of the stock option awards received by Mr. Michael P. Glimcher, a Class II Trustee, is reported in this Proxy Statement in the table entitled “Grants of Plan-Based Awards for 2006.” (6) The total value of all perquisites and other personal benefits received by the respective named trustee during the fiscal year ended December 31, 2006 was less than $10,000. (7) Represents the annual fee for serving as the non-executive Chairman of the Board of Trustees for the Company as well as the Board of Directors of Glimcher Properties Corporation, a wholly-owned subsidiary of the Company. (8) Value represents our compensation expense during 2006 for financial statement reporting purposes as computed in accordance with FAS 123R and includes our expense for a portion of stock option awards granted to Mr. Glimcher in 2003, 2004, and 2005 that vested in 2006 as well as a portion of his 2006 stock option award. (9) Represents Mr. Glimcher’s annual salary of $250,000 for services provided as Senior Advisor to the Company as well as $118,710 in reimbursements paid to Mr. Glimcher under the terms of his Employment and Consulting Agreement, dated January 20, 2005, between he, the Company, and GPLP for reasonable rent for office space located in Columbus, Ohio ($46,667), the reasonable salary of one administrative assistant ($50,671), and the cost of providing a part-time driver consistent with past practice ($21,372). The methodology used by the Company to determine the aggregate incremental cost for the expenditures listed was actual wages paid or invoice cost. Further discussion about the terms of the Employment and Consulting Agreement is provided in the following section of this Proxy Statement entitled “Certain Relationships and Related Party Transactions.” Each non-employee trustee serving on the Board of Trustees receives an annual fee of $40,000, plus a fee of $2,000 for each meeting of the Board of Trustees (the amount is reduced to $1,000 in the event that the meeting is a telephonic meeting) and $1,000 for each committee meeting attended. In addition, the trustee serving as the Chairman of the Audit Committee of the Board of Trustees receives an additional annual fee of $15,000, the trustee serving as the lead independent trustee of the Board of Trustees receives an additional annual fee of $15,000, and each trustee serving as the Chairman of the Executive Compensation Committee or the Corporate Governance Committee of the Board of Trustees receives an additional annual fee of $10,000, respectively. Any trustee serving as the Chairman of more than one committee shall receive an additional annual fee only for his or her chairmanship of one such committee. The trustee serving as the Chairman of the Executive Committee of the Board of Trustees shall not receive additional annual fees for serving in such capacity. Each trustee who is not an executive officer of the Company is eligible to receive grants of restricted Common Stock, stock options, share appreciation rights, restricted share units, performance awards, annual incentive awards, cash-based awards, and other share-based awards under the 2004 Plan and 1997 Plan. For non-employee trustees, options granted are immediately exercisable and have a ten-year term. Options granted to trustees who are employees of the Company are exercisable in one-third installments for a three-year period beginning on the first anniversary of the grant date and also have a ten-year term. To date, the Company has not granted restricted Common Stock to any non-employee trustees. Additionally, the Company reimburses trustees for travel expenses incurred in connection with attending activities or functions approved or sponsored by the Board of Trustees. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 45 PRESIDENT’S LETTER Certain Relationships and Related Party Transactions i. Employment & Consulting Agreement of Herbert Glimcher On January 20, 2005, Herbert Glimcher resigned as Chief Executive Officer of the Company and entered into an Employment and Consulting Agreement (the “Employment Agreement”) with the Company and GPLP (for purposes of discussing the Employment Agreement only, each together, the “Corporation”) pursuant to which he is the non-executive Chairman of the Board of Trustees (for purposes of discussing the Employment Agreement only, the “Board”) of the Company and the Board of Directors of Glimcher Properties Corporation. In addition, the Company employs Mr. Glimcher as Senior Advisor. Neither the Company nor Glimcher Properties Corporation consider Mr. Glimcher to be an executive officer. The initial term of the Employment Agreement was February 1, 2005 to May 31, 2006. On March 9, 2006, the Corporation and Mr. Glimcher agreed to renew the Employment Agreement for an additional one-year period to end on May 31, 2007 (the “Renewal Term”). Mr. Glimcher is not eligible to participate in any of the bonus plans available to the Corporation’s senior salaried employees, but is eligible to receive cash performance bonuses approved by the Board or the Board’s Executive Compensation Committee (the “Bonus”). Mr. Glimcher is entitled to participate in employee benefit plans customarily made available to senior salaried employees of the Company from time to time. The Company maintains a life insurance policy covering the life of Mr. Glimcher, reimburses Mr. Glimcher for reasonable rent for office space located in Columbus, Ohio, the reasonable salary of one administrative assistant, and provides a part-time driver consistent with past practice. Because the Corporation and Mr. Glimcher agreed to renew the Employment Agreement beyond May 31, 2006, 50,000 of the unvested stock options that Mr. Glimcher received on March 12, 2004 and May 10, 2004, respectively, which would have vested immediately and become exercisable on May 10, 2006, now shall vest and become exercisable on their original vesting dates – the third annual anniversary of the date of grant in 2007. Additionally, if Mr. Glimcher’s employment is terminated by reason of death or disability then any stock options or other awards issued to Mr. Glimcher under the Company’s incentive compensation and share option plans shall immediately vest and become exercisable on the date of Mr. Glimcher’s death or disability. For a period of two (2) years following the termination of Mr. Glimcher’s employment under the Employment Agreement (the “Post-Employment Restricted Period”) as well as during the initial term and Renewal Term (together with the Post-Employment Restricted Period, the “Restricted Period”), Mr. Glimcher shall not, without the prior written consent of the Board, serve as an employee, agent, partner, shareholder, member, officer, director of or consultant for, or in any capacity participate, engage or have, directly or indirectly, a financial or other interest in any Competitive Business (as defined below). Notwithstanding the foregoing, Mr. Glimcher may pursue any business activity for which the Board has previously consented and waived any corporate opportunity rights. Subject to certain exceptions, neither Mr. Glimcher, nor any entity of which he serves as a director, officer, trustee, member, manager, general partner, or limited partner, shall employ any person during the Restricted Period who was employed by the Corporation until the Corporation has not employed such person for more than one year. Mr. Glimcher will also refrain during the Restricted Period from disclosing, without the prior written consent of the Corporation’s Chief Executive Officer, any confidential information about the Corporation and from making any disparaging comments about the Corporation. A “Competitive Business” shall mean participation, directly or indirectly, in the planning, development or operation of any mall or any enclosed group of retail establishments operating as a single property (a "Project") in any city or town and its greater standard metropolitan statistical area (each, a "Market") in which the Company: (i) conducts its business at such time, (ii) has commenced and not subsequently abandoned development activities, or (iii) has previously proposed a Project to the Board to be undertaken at any time in the next five years in such Market and the Board has not yet rejected such Project. In addition to the fees that Mr. Glimcher receives for serving as the non-executive Chairman of the Board of the Company and Chairman of the Board of Directors of Glimcher Properties Corporation and the annual salary for serving as Senior Advisor to the Company, Mr. Glimcher shall receive $2,000,000 in cash during the Post-Employment Restricted Period from the Company as follows: a) $360,000 to provide consulting services during the Post-Employment Restricted Period which shall be payable at the rate of $20,000 per month commencing on the last day of the seventh month following the start of the Post-Employment Restricted Period (the “Consulting Payment”); b) $810,000 to abide by the Employment Agreement’s non- CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 46 compete, non-solicitation, non-disparagement, and confidentiality provisions, which shall be payable at the rate of $45,000 per month commencing on the last day of the seventh month following the start of the PostEmployment Restricted Period (the “Non-Competition Payment”); and c) $830,000 for special, unique, and substantial contributions to the Corporation, payable on the last day of the seventh month of the PostEmployment Restricted Period. If Mr. Glimcher’s employment is terminated for cause or he breaches the Employment Agreement’s non-competition provisions then any unpaid installments of the Consulting Payment or Non-Competition Payment shall be forfeited. The Employment Agreement has modified the terms of the Severance Benefits Agreement between Mr. Glimcher and the Corporation, dated June 11, 1997. Prior to the modification, Mr. Glimcher was entitled to three times (3x) his base salary and bonus for the calendar year prior to the change of control as determined by the terms of the Severance Benefits Agreement. As modified, if a change of control occurs after May 31, 2006 then Mr. Glimcher will still be entitled to receive three times (3x) his base salary and bonus amounts, but the base salary and bonus amounts used to determine his severance payment shall not exceed $350,000. The Employment Agreement was unanimously approved by the independent members of the Board on the joint recommendation of the Executive Compensation Committee and Nominating and Corporate Governance Committee after consultation with Hewitt who found that the financial arrangements and other terms of the Employment Agreement were within the range of competitive marketplace practices for similarly situated Chief Executive Officers/founders. ii. Corporate Flight Relationship PRESIDENT’S LETTER PROXY STATEMENT The Company paid Corporate Flight, Inc. (“CFI”), which is wholly owned by Herbert Glimcher, $360,000, for fiscal year ended December 31, 2006, for the use in connection with Company related matters, of an airplane owned by CFI. iii. Archer-Meek-Weiler Insurance Agency The Company has engaged Archer-Meek-Weiler, a company of which Alan R. Weiler, a Class II Trustee, is Chairman, as its agent for the purpose of obtaining property, liability, directors and officers, and employee practices liability insurance coverage. In connection with securing such insurance coverage, Archer-MeekWeiler received fees and net commissions of $343,480 for the fiscal year ended December 31, 2006. The stock of Archer-Meek-Weiler is owned by a trust for the benefit of Mr. Weiler’s children and the children of his brother, Robert J. Weiler. iv. Leasing Activity FORM 10-K A brother of Herbert Glimcher owns a company that leases six store locations in the Company’s properties of which the leases for two were terminated during 2006. The aggregate rents received by the Company for these leases were $227,000 for the fiscal year ended December 31, 2006. v. Consulting Agreement with Philip G. Barach Information about this transaction is provided in the section of this Proxy Statement entitled “Our Board of Trustees, its Committees, & Their Policies” under the section captioned “Compensation Committee Interlocks and Insider Participation.” REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION 47 PRESIDENT’S LETTER COMPENSATION COMMITTEE REPORT The Executive Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis section of this Proxy Statement with the Company’s management and, based on that review and discussion, the Executive Compensation Committee recommended to the Board of Trustees that the aforementioned Compensation Discussion and Analysis section be included in this Proxy Statement. The Executive Compensation Committee has furnished the foregoing report. March 8, 2007 Howard Gross Niles C. Overly William S. Williams REMAINDER OF PAGE INTENTIONALLY LEFT BLANK PROXY STATEMENT CORPORATE INFORMATION FORM 10-K 48 INFORMATION ABOUT SECURITY OWNERSHIP AND OUR EQUITY COMPENSATION PLANS The tables set forth below provide the following information: (i) information regarding the beneficial ownership of the Common Shares by each trustee, trustee nominee, the Named Executives, all trustees and executive officers as a group, and all other persons known to the Company to be the beneficial owner of more than five percent (5%) of the Company’s outstanding Common Shares and each class of equity securities of the Company as of the Record Date, except as otherwise noted, and (ii) information regarding the Company’s equity compensation plans in effect as of December 31, 2006. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT COMMON STOCK OWNERSHIP Name and Address of Beneficial Owner (1) Herbert Glimcher Michael P. Glimcher George A. Schmidt Thomas J. Drought, Jr. Mark E. Yale Marshall A. Loeb Robert F. Beffa David M. Aronowitz Amount Beneficially Owned (2) (3) 2,437,579(7) 761,004(8) 295,435(9) 59,051 (10) 50,500 (11) 40,133(12) 0 3,000(13) 3,000 (13) 24,000 (13) 9,000 (13) 12,000(14) 113,157 (15) 10,000 (16) Percent Of Class 6.28% 2.02% (5) (5) (5) (5) (4) PRESIDENT’S LETTER PROXY STATEMENT (4) FORM 10-K 0% (5) (5) (5) (5) (5) (5) Philip G. Barach Wayne S. Doran Howard Gross Niles C. Overly Alan R. Weiler William S. Williams All trustees and executive officers as a group (15 persons) Cohen & Steers, Inc. Cohen & Steers Capital Management, Inc. 280 Park Avenue, 10th Floor New York, NY 10017 CORPORATE INFORMATION (5) 3,818,258 5,785,534 9.58% (4) 15.70%(17) 49 PRESIDENT’S LETTER Name and Address of Beneficial Owner (1) Deutsche Bank AG Taunusanlage 12, D-60325 Frankfurt am Main Federal Republic of Germany The Vanguard Group, Inc. 100 Vanguard Blvd. Malvern, PA 19355 COMMON STOCK OWNERSHIP Amount Beneficially Owned (2) (3) 3,304,403 Percent Of Class 8.99%(18) 2,356,093 6.41%(19) PROXY STATEMENT 8.125% SERIES G PREFERRED STOCK OWNERSHIP Amount Name and Address of Beneficially Beneficial Owner Owned (2) Heitman Real Estate Securities, LLC 191 North Wacker Drive, Suite 2500 Chicago, IL 60606 Alan R. Weiler 330,400 Percent Of Class 5.51% (20) 32,000(21) (6) (1) Unless otherwise indicated, the address for each such individual is 150 East Gay Street, Columbus, Ohio 43215. (2) Unless otherwise indicated, the listed person has sole voting and investment power with respect to the Common Shares and 8.125% Series G Cumulative Preferred Shares of Beneficial Interest (“Series G Preferred Stock”), as applicable. (3) Certain trustees and executive officers of the Company own limited partnership operating units in GPLP (“OP Units”), which OP Units may (at the holder's election) be redeemed at any time for, at the sole option of GPLP, cash (at a price equal to the fair market value of an equal number of Common Shares), Common Shares on a one-for-one basis, or any combination of cash and Common Shares (issued at fair market value on a one-for-one basis). (4) For the person or group listed, the Percent of Class was computed based on 37,058,102 Common Shares outstanding as of the Record Date and, in each person's case, the number of Common Shares issuable upon the exercise of options and the redemption of OP Units held by such persons, or in the case of all trustees and executive officers as a group, the number of Common Shares issuable upon the exercise of options and the redemption of OP Units held by all such members of such group. Common Shares issuable upon exercise of stock options are included only to the extent the related stock options are exercisable within 60 days of the Record Date. (5) The percentage ownership of the listed person does not exceed one percent (1%) of the Company’s outstanding Common Shares. (6) The percentage ownership of the listed person does not exceed one percent (1%) of the Company’s outstanding 8.125% Series G Preferred Stock. (7) Includes 557,227 Common Shares and 958,230 OP Units held directly by Herbert Glimcher. Also includes 120,404 OP Units held by Mr. Glimcher's wife and 684,011 of Mr. Glimcher's 700,818 options, of which: a) 95,122 fully vested on May 29, 2001, b) 263,334 fully vested on March 10, 2002, c) 88,644 fully vested on March 5, 2005, d) 94,718 fully vested on March 11, 2006, e) 2,000 fully vested on March 9, 2007, f) 117,580 fully vested on March 12, 2007, g) 1,000 will fully vest on May 5, 2007, and h) 21,613 fully vested on May 10, 2006. Also includes CORPORATE INFORMATION FORM 10-K 50 53,553 Common Shares which are owned by Mr. Glimcher and his wife as tenants-in-common and 64,154 Common Shares which are owned by trusts for the benefit of Mr. Glimcher's children, grandchildren and nephews, some of which Mr. Glimcher's wife and his son, Michael P. Glimcher, serve as co-trustees, and some of which another son, Robert Glimcher, serves as trustee. Mr. Glimcher does not exercise or share investment control over the Common Shares owned by the trusts described above. None of Mr. Glimcher’s Common Share holdings are pledged as collateral or security. (8) Includes 107,483 Common Shares held directly by Michael P. Glimcher and 500 Common Shares held directly by Mr. Glimcher’s wife. Also includes 157,189 OP Units held by Michael P. Glimcher. Also includes 320,995 of Mr. Glimcher's 405,000 options, of which: a) 30,000 fully vested on May 29, 2001, b) 25,000 fully vested on March 5, 2005, c) 75,000 fully vested on March 11, 2006, d) 50,000 fully vested on March 9, 2007, e) 97,985 fully vested on March 12, 2007, f) 25,000 will fully vest on May 5, 2007, and g) 18,010 fully vested on May 10, 2006. Of Mr. Glimcher’s 107,483 Common Shares, 16,667 shares have transfer restrictions that lapse in three equal annual installments commencing on the first anniversary of the grant date each year thereafter until the third anniversary of the grant date and 40,700 shares have transfer restrictions that lapse in three equal annual installments commencing on the third anniversary of the grant date and each year thereafter until the fifth anniversary of the grant date. Additionally, 8,000 Common Shares are held in trust for the benefit of Mr. Glimcher (Robert Glimcher and Arne Glimcher, Co-Trustees), 102,683 OP Units are held in trust for the benefit of Mr. Glimcher (Robert Glimcher and Arne Glimcher, Co-Trustees), and 64,154 Common Shares are owned by trusts for the benefit of Mr. Glimcher’s siblings, nieces, nephews, cousins, and children, of which Mr. Glimcher is a co-trustee. Mr. Glimcher does not exercise investment control over the Common Shares or OP Units held in trusts for which he is not a trustee. Mr. Glimcher has pledged 50,116 of his direct Common Share holdings as security; however, such pledgees do not have the right to acquire beneficial ownership of such Common Shares as specified in Rule 13d3(d)(1) of the Securities Exchange Act of 1934, as amended. (9) Includes 89,389 Common Shares held directly by George A. Schmidt. Also includes, 206,046 of Mr. Schmidt’s 234,647 stock options, of which: a) 20,000 fully vested on May 29, 2001, b) 34,647 fully vested on March 7, 2004, c) 30,000 fully vested on March 5, 2005, d) 50,000 fully vested on March 11, 2006, e) 16,667 fully vested on March 9, 2007, f) 39,194 fully vested on March 12, 2007, g) 8,334 will fully vest on May 5, 2007, and h) 7,204 fully vested on May 10, 2006. Of Mr. Schmidt’s 89,389 Common Shares, 5,556 shares have transfer restrictions that lapse in three equal annual installments commencing on the first anniversary of the grant date and each year thereafter until the third anniversary of the grant date and 13,833 shares have transfer restrictions that lapse in three equal annual installments commencing on the third anniversary of the grant date and each year thereafter until the fifth anniversary of the grant date. None of Mr. Schmidt’s Common Share holdings are pledged as collateral or security. (10) Include 8,959 Common Shares held directly by Thomas J. Drought, Jr. Also includes, 50,092 of Mr. Drought’s 64,867 stock options, of which: a) 1,534 fully vested on March 9, 2003, b) 13,333 fully vested on March 9, 2007, c) 13,333 fully vested on March 11, 2006, d) 15,678 fully vested on March 12, 2007, e) 3,333 will fully vest on May 5, 2007, and f) 2,881 fully vested on May 10, 2006. Of Mr. Drought’s 8,959 Common Shares, 6,733 shares have transfer restrictions that lapse in three equal annual installments commencing on the third anniversary of the grant date and each year thereafter until the fifth anniversary of the grant date. None of Mr. Drought’s Common Share holdings are pledged as collateral or security. (11) Includes 18,833 Common Shares held directly by Mark E. Yale. Also includes, 31,667 of Mr. Yale’s 60,000 stock options, of which: a) 13,333 fully vested on September 8, 2006, b) 10,000 fully vested on March 9, 2007, and c) 8,334 will fully vest on May 5, 2007. Of Mr. Yale’s 18,833 Common Shares, 3,334 shares have transfer restrictions that lapse in three equal annual installments commencing on the first anniversary of the grant date and each year thereafter until the third anniversary of the grant date and 13,833 shares have transfer restrictions that lapse in three equal annual installments commencing on the third anniversary of the grant date and each year thereafter until the fifth anniversary of the grant date. None of Mr. Yale’s Common Share holdings are pledged as collateral or security. PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 51 (12) Includes 23,466 Common Shares held directly by Marshall A. Loeb. Also includes, 16,667 of Mr. Loeb’s 50,000 stock options, of which: a) 8,333 fully vested on May 16, 2006 and b) 8,334 will fully vest on May 5, 2007. Of Mr. Loeb’s 23,466 Common Shares, 5,556 shares have transfer restrictions that lapse in three equal annual installments commencing on the first anniversary of the grant date and each year thereafter until the third anniversary of the grant date and 15,133 shares have transfer restrictions that lapse in three equal annual installments commencing on the third anniversary of the grant date and each year thereafter until the fifth anniversary of the grant date. None of Mr. Loeb’s Common Share holdings are pledged as collateral or security. (13) Represents options that are immediately exercisable. (14) Includes 9,000 options that are immediately exercisable. Also includes 3,000 Common Shares owned directly by Mr. Overly. (15) Includes 18,000 Common Shares held by Alan R. Weiler, individually, and 5,000 Common Shares held by a limited partnership of which Mr. Weiler and his spouse are the general partners. Also includes 12,000 options, which are immediately exercisable and 78,157 OP Units owned by a limited partnership of which Mr. Weiler and his spouse are the general partners. (16) Includes 9,000 options that are immediately exercisable. Also includes 1,000 Common Shares owned directly by Mr. Williams. (17) Based on a Schedule 13G/A, dated and filed with the SEC on February 13, 2007, on which Cohen & Steers, Inc. and Cohen & Steers Capital Management, Inc. reported their aggregate beneficial ownership with respect to 5,785,534 Common Shares. (18) Based on a Schedule 13G/A, dated and filed with the SEC on January 31, 2007, on which Deutsche Bank AG reported its aggregate beneficial ownership with respect to 3,304,403 Common Shares. PROXY STATEMENT PRESIDENT’S LETTER FORM 10-K (19) Based on a Schedule 13G, dated November 30, 2006 and filed with the SEC on February 14, 2007, on which The Vanguard Group, Inc. reported its aggregate beneficial ownership with respect to 2,356,093 Common Shares. (20) Based on a Schedule 13G/A, dated and filed with the SEC on February 7, 2007, on which Heitman Real Estate Securities, LLC reported its aggregate beneficial ownership with respect to 330,400 of the Series G Preferred Stock. (21) Shares are held by a limited partnership of which Mr. Weiler and his spouse are the general partners. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION 52 Information regarding the Company’s equity compensation plans in effect as of December 31, 2006 is as follows: Equity Compensation Plan Information Plan Category Number of securities to be issued upon exercise of outstanding options, warrants, and rights (a) Equity compensation plans approved by shareholders Equity compensation plans not approved by shareholders 2,132,132 Weighted average exercise price of outstanding options, warrants, and rights (b) $21.52 Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) 477,503 PRESIDENT’S LETTER PROXY STATEMENT N/A N/A N/A As of the Record Date, the number of securities to be issued from our equity compensation plans upon the exercise of outstanding options, warrants, and rights was 2,001,451. As of the Record Date, the weighted average exercise price of outstanding options, warrants, and rights from our equity compensation plans was $22.12 and the number of securities remaining available for future issuance under our equity compensation plans (excluding the securities reflected in column (a)) was 289,954. As of the Record Date, we have 124,745 securities outstanding as full value awards under our plans. Full value awards are plan awards other than options or SARs that are settled by the issuance of Common Shares such as restricted shares or restricted share units. The options outstanding under our plans have a weighted average remaining term of 6.26 years. We do not anticipate making any additional awards or grants under the 2004 Plan between the Record Date and the date of the Annual Meeting. REMAINDER OF PAGE INTENTIONALLY LEFT BLANK FORM 10-K CORPORATE INFORMATION 53 PRESIDENT’S LETTER AUDIT COMMITTEE STATEMENTS The Audit Committee reviews the Company’s financial reporting process on behalf of the Board of Trustees. Management has the primary responsibility for the financial statements and reporting process. The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles. In this context, the Audit Committee has reviewed and discussed the Company’s audited financial statements with both management and the Company’s independent registered public accounting firm. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by Statements on Auditing Standards (“SAS”) No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T, as amended and modified. In addition, the Audit Committee has received from the independent registered public accounting firm the written disclosures and letter required by Independence Standards Board Standard No. 1 (Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees), as adopted by the Public Company Accounting Oversight Board in Rule 3600T, as amended and modified, and discussed with them their independence from the Company and its management. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Trustees, and the Board of Trustees has approved, that the Company’s audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 for filing with the Securities and Exchange Commission. March 8, 2007 David M. Aronowitz Wayne S. Doran Niles C. Overly PROXY STATEMENT REMAINDER OF PAGE INTENTIONALLY LEFT BLANK CORPORATE INFORMATION FORM 10-K 54 INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS – FEES FOR AUDIT & NON-AUDIT SERVICES The Audit Committee has appointed BDO as the Company’s independent registered public accounting firm to audit the financial statements of the Company for the fiscal year ending December 31, 2007. A proposal to ratify this appointment is being presented to the holders of Common Shares at the Annual Meeting and is presented in the section of this Proxy Statement entitled “Proposals for Shareholder Consideration at the Annual Meeting.” A representative of BDO is expected to be present at the Annual Meeting and available to respond to appropriate questions and, although BDO has indicated that no statement will be made, an opportunity for a statement will be provided. AUDIT FEES. BDO’s fees for professional services rendered for the audit of the Company’s annual financial statements and internal control over financial reporting for the fiscal years ended December 31, 2006 and December 31, 2005 and review of financial statements included in the Company’s quarterly reports were $492,333 and $455,150, respectively. Additionally, BDO received fees of $4,380 for services relating to the Company’s filings on Form 8-K and response to an SEC comment letter during the fiscal year ended December 31, 2006 and received fees of $36,766 for services relating to the Company’s registration statements and re-offer prospectuses issued during the fiscal year ended December 31, 2005. During the fiscal year ended December 31, 2005, BDO received fees of $40,413 for services relating to procedures performed for the Company’s restatement (during the fiscal year ended December 31, 2005) of its annual financial statements for the fiscal years ended December 31, 2003, 2002, and 2001. AUDIT-RELATED FEES. BDO’s fees for audit-related services for the fiscal years ended December 31, 2006 and 2005 were $178,667 and $235,960, respectively. The fees related to attest services not required by statute or regulation ($178,667 in 2006 and $171,350 in 2005), services related to the Company’s SEC investigation ($61,610 in 2005), and other fees ($3,000 in 2005). TAX FEES. BDO’s fees for the rendering of tax compliance and tax consulting services for the fiscal years ended December 31, 2006 and 2005 were $86,393 and $61,315, respectively. ALL OTHER FEES. There were no other fees paid to BDO in the fiscal years ended December 31, 2006 and December 31, 2005. All of the services provided by BDO described above under the captions “Audit Fees,” “Audit Related Fees,” “Tax Fees,” and “All Other Fees” were approved by the Company’s Audit Committee. The Audit Committee has determined that the rendering of professional services by BDO is compatible with maintaining BDO’s independence. Audit Committee Pre-Approval Policies The Audit Committee Charter provides that the Audit Committee shall approve in advance all audit services and all non-audit services provided by the independent registered public accounting firm based on policies and procedures developed by the Audit Committee from time to time. The Audit Committee will not approve any non-audit services prohibited by applicable SEC or NYSE regulations or any services in connection with a transaction initially recommended by the independent registered public accounting firm, the purpose of which may be tax avoidance and the tax treatment of which may not be supported by the Code and its related regulations. The Company’s Audit Committee expects that our independent registered public accounting firm will seek pre-approval from the Audit Committee prior to providing services to the Company. PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 55 PRESIDENT’S LETTER GENERAL INFORMATION Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires the Company's trustees, executive officers, and persons who own more than ten percent (10%) of a registered class of the Company's equity securities to file reports of ownership and changes in ownership with the SEC on Forms 3, 4, and 5. Trustees, executive officers, and beneficial owners of greater than ten percent (10%) are required by the regulations of the SEC to furnish the Company with copies of all of the Section 16(a) Forms 3, 4, and 5 that they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that all of its trustees, executive officers, and beneficial owners of greater than ten percent (10%) complied with all Section 16(a) filing requirements applicable to them with respect to transactions during the year ended December 31, 2006, except that a Form 4 reporting one (1) transaction by Mr. Michael P. Glimcher, a Form 4 reporting one (1) transaction by Mr. Philip G. Barach, a Form 4 reporting one (1) transaction by Mr. Robert F. Beffa, and a Form 4 reporting three (3) transactions by Mr. Herbert Glimcher were not filed within the time frame prescribed by the rules and regulations of the SEC. Shareholder Proposals Proposals of shareholders intended to be presented at the 2008 Annual Meeting of Shareholders must be received by the Company at its principal executive offices no later than November 30, 2007 for inclusion in the Company's proxy statement and form of proxy relating to that meeting. Additionally, the Bylaws provide that in order for a shareholder to nominate a candidate for election as a trustee at an annual meeting of shareholders or propose business for consideration at such meeting, written notice must be given to the Secretary of the Company no more than 90 days nor less than 60 days prior to the first anniversary of the preceding year's annual meeting. Accordingly, under the Bylaws, for a shareholder nomination or business proposal to be considered at the 2008 Annual Meeting of Shareholders, notice of such nominee or proposal must be received not earlier than February 11, 2008 and no later than March 12, 2008. The fact that the Company may not insist upon compliance with these requirements should not be construed as a waiver by the Company of its right to do so at any time in the future. The Nominating and Corporate Governance Committee will consider nominees recommended by the shareholders using the process described herein. Financial and Other Information The Company's Annual Report to Shareholders and Annual Report on Form 10-K for the fiscal year ended December 31, 2006, including financial statements, are being sent concurrently to the Company's shareholders with this Proxy Statement. Expenses of Solicitation The cost of soliciting proxies will be borne by the Company. Brokers and nominees should forward soliciting materials to the beneficial owners of the Common Shares held of record by such persons and the Company will reimburse them for their reasonable forwarding expenses. In addition to the use of the mails, proxies may be solicited by trustees, officers, and regular employees of the Company, who will not be specially compensated for such services, by means of personal calls upon, or telephonic or telegraphic communications with, shareholders or their personal representatives. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 56 Other Matters The Board of Trustees knows of no matters other than those described in this Proxy Statement that are likely to come before the Annual Meeting. If any other matters properly come before the Annual Meeting, the persons named in the accompanying form of proxy intend to vote the proxies in accordance with their discretion. PRESIDENT’S LETTER By Order of the Board of Trustees Kim A. Rieck Senior Vice President, General Counsel, & Secretary March 30, 2007 REMAINDER OF PAGE INTENTIONALLY LEFT BLANK PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 57 APPENDIX A PRESIDENT’S LETTER Glimcher Realty Trust Amended and Restated 2004 Incentive Compensation Plan Adopted by the Board of Trustees on March 15, 2007 CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 58 PRESIDENT’S LETTER Contents Article 1. Establishment, Purpose, and Duration Article 2. Definitions Article 3. Administration Article 4. Shares Subject to the Plan and Maximum Awards Article 5. Eligibility and Participation Article 6. Options Article 7. Share Appreciation Rights Article 8. Restricted Shares and Restricted Share Units Article 9. Performance Units/Performance Shares Article 10. Cash-Based Awards and Other Share-Based Awards Article 11. Performance Measures Article 12. Nonemployee Trustee Awards Article 13. Dividend Equivalents Article 14. Beneficiary Designation Article 15. Deferrals Article 16. Rights of Participants Article 17. Change of Control Article 18. Amendment, Modification, Suspension, and Termination Article 19. Withholding Article 20. Successors Article 21. General Provisions A-1 A-1 A-4 A-4 A-6 A-6 A-8 A-9 A-10 A-11 A-12 A-13 A-13 A-13 A-14 A-14 A-14 A-14 A-15 A-15 A-15 PROXY STATEMENT FORM 10-K CORPORATE INFORMATION i PRESIDENT’S LETTER Glimcher Realty Trust Amended and Restated 2004 Incentive Compensation Plan Article 1. Establishment, Purpose, and Duration 1.1 Establishment. Glimcher Realty Trust, a Maryland real estate investment trust (the “Company”), established an incentive compensation plan known as the 2004 Incentive Compensation Plan (the “Plan”), which has been amended and restated as set forth in this document. The Plan permits the grant of Cash-Based Awards, Nonqualified Options, Incentive Options, Share Appreciation Rights (SARs), Restricted Shares, Restricted Share Units, Performance Shares, Performance Units, and Other ShareBased Awards. The Plan became effective upon receipt of shareholder approval on May 7, 2004 (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof. PROXY STATEMENT 1.2 Purpose of the Plan. The purpose of the Plan is to provide a means whereby Employees, Trustees, and Third Party Service Providers of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of the Plan is to provide a means through which the Company may attract able individuals to become Employees or serve as Trustees, or Third Party Service Providers of the Company and to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company. 1.3 Duration of the Plan. Unless sooner terminated as provided herein, the Plan shall terminate ten (10) years from the Effective Date. After the Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions. Notwithstanding the foregoing, no Incentive Options may be granted more than ten (10) years after the earlier of (a) adoption of the Plan by the Board, and (b) the Effective Date. FORM 10-K Article 2. Definitions Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized. 2.1 “Affiliate” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act. “Annual Award Limit” or “Annual Award Limits” have the meaning set forth in Section 4.3. “Award” means, individually or collectively, a grant under this Plan of Cash-Based Awards, Nonqualified Options, Incentive Options, SARs, Restricted Shares, Restricted Share Units, Performance Shares, Performance Units, or Other Share-Based Awards, in each case subject to the terms of this Plan. “Award Agreement” means either (i) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, or (ii) a written statement issued by the Company to a Participant describing the terms and provisions of such Award. “Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. “Board” or “Board of Trustees” means the Board of Trustees of the Company. “Cash-Based Award” means an Award granted to a Participant as described in Article 10. 2.2 2.3 CORPORATE INFORMATION 2.4 2.5 2.6 2.7 A-1 2.8 2.9 “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. PRESIDENT’S LETTER “Committee” means the Executive Compensation Committee of the Board or any subcommittee thereof, or any other committee designated by the Board to administer this Plan. The members of the Committee shall be appointed from time to time by and shall serve at the discretion of the Board and, unless otherwise determined by the Board, the Committee shall consist of no fewer than two trustees, each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m) of the Code, and (iii) an “independent director” for purposes of the rules and regulations of the New York Stock Exchange. “Company” means Glimcher Realty Trust, a Maryland real estate investment trust, and any successor thereto as provided in Article 20 herein. “Covered Employee” means a Participant who is a “covered employee,” as defined in Code Section 162(m) and the Treasury Regulations promulgated under Code Section 162(m), or any successor statute. “Effective Date” has the meaning set forth in Section 1.1. “Employee” means any employee of the Company, its Affiliates, and/or its Subsidiaries. “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto. “Fair Market Value” or “FMV” as of any applicable date, means the closing price of a Share reported on the New York Stock Exchange or other established stock exchange (or exchanges) on the applicable date, or if Shares are not traded on such applicable date, the closing price on the next day following such applicable date on which Shares are traded. If the Shares are traded over the counter on the applicable date, Fair Market Value or FMV means the closing bid and asked prices of a Share on the applicable date, or if there is no bid and asked price on such applicable date, the closing bid and asked price on the next succeeding date on which there is a bid and asked price following such applicable date. In the event Shares are not publicly traded on the applicable date, Fair Market Value or FMV shall be determined by the Committee in such manner as it deems appropriate. “Full Value Award” means an Award other than in the form of an ISO, NQSO, or SAR, and which is settled by the issuance of Shares. “Freestanding SAR” means an SAR that is granted independently of any Options, as described in Article 7. “Grant Price” means the price established at the time of grant of an SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR. “Incentive Option” or “ISO” means an Option to purchase Shares granted under Article 6 to an Employee and that is designated as an Incentive Option and that is intended to meet the requirements of Code Section 422, or any successor provision. “Insider” shall mean an individual who is, on the relevant date, an officer or Trustee of the Company, or a more than ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act. “Nonemployee Trustee” means a Trustee who is not an Employee. “Nonemployee Trustee Award” means any NQSO, SAR, or Full Value Award granted, whether singly, in combination, or in tandem, to a Participant who is a Nonemployee Trustee pursuant to such applicable terms, conditions, and limitations as the Board or Committee may establish in accordance with this Plan. 2.10 2.11 PROXY STATEMENT 2.12 2.13 2.14 2.15 FORM 10-K 2.16 2.17 2.18 2.19 CORPORATE INFORMATION 2.20 2.21 2.22 A-2 2.23 PRESIDENT’S LETTER “Nonqualified Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements. “Option” means an Incentive Option or a Nonqualified Option, as described in Article 6. “Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option. “Other Share-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10. “Participant” means any eligible individual as set forth in Article 5 to whom an Award is granted. “Performance-Based Compensation” means compensation under an Award that satisfies the requirements of Section 162(m) of the Code and the applicable Treasury Regulations thereunder for certain performance-based compensation paid to Covered Employees. “Performance Measures” means measures as described in Article 11 on which the performance goals are based and which are approved by the Company’s shareholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation. “Performance Period” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award. “Performance Share” means an Award granted under Article 9 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved. “Performance Unit” means an Award granted under Article 9 herein and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved. “Period of Restriction” means the period when Restricted Shares or Restricted Share Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8. “Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof. “Plan” means this Glimcher Realty Trust 2004 Incentive Compensation Plan, as it may hereinafter be amended or restated. “Plan Year” means the calendar year. “Restricted Shares” means an Award granted to a Participant pursuant to Article 8. “Restricted Share Unit” means an Award granted to a Participant pursuant to Article 8, except no Shares are actually awarded to the Participant on the date of grant. “Share” or “Shares” means the Company’s common shares of beneficial interest. “Share Appreciation Right” or “SAR” means an Award, designated as a SAR, pursuant to the terms of Article 7 herein. “Subsidiary” means any corporation, partnership, limited liability company or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest. 2.24 2.25 2.26 2.27 2.28 PROXY STATEMENT 2.29 2.30 2.31 2.32 FORM 10-K 2.33 2.34 2.35 2.36 CORPORATE INFORMATION 2.37 2.38 2.39 2.40 2.41 A-3 2.42 “Tandem SAR” means an SAR that is granted in connection with a related Option pursuant to Article 7 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled). “Third Party Service Provider” means any consultant, agent, advisor, or independent contractor who renders services to the Company, a Subsidiary, or an Affiliate that (a) are not in connection with the offer and sale of the Company’s securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Company’s securities. “Treasury Regulations” means the regulations promulgated under the Code. “Trustee” means any individual who is a member of the Board of Trustees of the Company. “Withholding Taxes” means any federal, state, local or foreign income taxes, withholding taxes, or employment taxes required to be withheld by law or regulations. PRESIDENT’S LETTER 2.43 2.44 2.45 2.46 PROXY STATEMENT Article 3. Administration 3.1 General. The Committee shall be responsible for administering the Plan, subject to this Article 3 and the other provisions of the Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Trustees shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals. 3.2 Authority of the Committee. The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of the Plan and any Award Agreement or other agreement or document ancillary to or in connection with the Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in Award Agreements, and, subject to Article 18, adopting modifications and amendments to the Plan or any Award Agreement, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates, and/or its Subsidiaries operate. 3.3 Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company, and/or its Subsidiaries and Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individual to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individual may have under the Plan. The Committee may, by resolution, authorize one or more officers of the Company to do one or both of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards; (b) designate Third Party Service Providers to be recipients of Awards; and (c) determine the size of any such Awards; provided, however, (i) the Committee shall not delegate such responsibilities to any such officer for Awards granted to an Employee that is considered an Insider; (ii) the resolution providing such authorization sets forth the total number of Awards such officer(s) may grant; and (iii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. Notwithstanding the foregoing, the Committee may not delegate to any officer the ability to take any action or make any determination regarding issues arising out of Code Section 162(m). Article 4. Shares Subject to the Plan and Maximum Awards 4.1 Number of Shares Available for Awards. (a) Subject to adjustment as provided in Section 4.4 herein, the maximum number of Shares available for issuance to Participants under the Plan (the “Share Authorization”) shall be three million six hundred thousand (3,600,000) Shares. Of the Shares reserved for issuance under Section 4.1(a) of the Plan, no more than one million (1,000,000) of the reserved Shares may be issued pursuant to Full Value Awards. FORM 10-K CORPORATE INFORMATION (b) A-4 (c) PRESIDENT’S LETTER Subject to the limit set forth in Section 4.1(a) on the number of Shares that may be issued in the aggregate under the Plan, the maximum number of Shares that may be issued pursuant to ISOs and NQSOs shall be: (i) three million six hundred thousand (3,600,000) Shares that may be issued pursuant to Awards in the form of ISOs; and three million six hundred thousand (3,600,000) Shares that may be issued pursuant to Awards in the form of NQSOs. (ii) (d) Subject to the limit set forth in Section 4.1(a) on the number of Shares that may be issued in the aggregate under the Plan, the maximum number of Shares that may be issued to Nonemployee Trustees shall be two hundred thousand (200,000) Shares, and no Nonemployee Trustee may receive Awards subject to more than fifteen thousand (15,000) Shares in any Plan Year. 4.2 Share Usage. Shares covered by an Award shall only be counted as used to the extent they are actually issued; provided, however, that the full number of Share Appreciation Rights granted that are to be settled by the issuance of Shares shall be counted against the number of Shares available for award under the Plan, regardless of the number of Shares actually issued upon settlement of such Share Appreciation Rights. Further, any Shares (i) withheld to satisfy tax withholding obligations on Awards issued under the Plan, (ii) tendered to pay the exercise price of Awards issued under the Plan, or (iii) repurchased on the open market with the proceeds of an Option exercise will no longer be eligible to be returned as available Shares under the Plan. Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under the Plan. The Shares available for issuance under the Plan may be authorized and unissued Shares or treasury Shares. 4.3 Annual Award Limits. Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (each an “Annual Award Limit” and, collectively, “Annual Award Limits”) shall apply to grants of such Awards under the Plan: FORM 10-K PROXY STATEMENT (a) Options: The maximum aggregate number of Shares subject to Options granted in any one (1) Plan Year to any one (1) Participant shall be three hundred thousand (300,000) Shares. SARs: The maximum number of Shares subject to Share Appreciation Rights granted in any one (1) Plan Year to any one (1) Participant shall be three hundred thousand (300,000) Shares. Restricted Shares or Restricted Share Units: The maximum aggregate grant with respect to Awards of Restricted Shares or Restricted Share Units in any one (1) Plan Year to any one (1) Participant shall be one hundred thousand (100,000). Performance Units or Performance Shares: The maximum aggregate Award of Performance Units or Performance Shares that any one (1) Participant may receive in any one Plan Year shall be one hundred thousand (100,000) Shares (if such Award is payable in Shares), or equal to the value of one hundred thousand (100,000) Shares (if such Award is payable in cash or property other than Shares) determined as of the earlier of the date of vesting or payout. Cash-Based Awards: The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one (1) Participant in any one (1) Plan Year may not exceed three million ($3,000,000) dollars. Other Share-Based Awards. The maximum aggregate grant with respect to Other ShareBased Awards pursuant to Section 10.2 in any one (1) Plan Year to any one (1) Participant shall be one hundred thousand (100,000) Shares. (b) (c) (d) CORPORATE INFORMATION (e) (f) The above Annual Award Limits are intended to comply with Code Section 162(m) and the Treasury Regulations thereunder, and shall be applied and/or construed in such a way to ensure compliance with Code Section 162(m) and the Treasury Regulations thereunder. A-5 4.4 Adjustments in Authorized Shares. Notwithstanding anything else to the contrary contained in the Plan, in the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee, in order to prevent dilution or enlargement of Participants’ rights under the Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under the Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards. The Committee, shall also make appropriate adjustments in the terms of any Awards under the Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. Subject to the provisions of Article 18, without affecting the number of Shares reserved or available hereunder, the Committee shall authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, spin-off, split-off, split-up, acquisition of property or stock, or reorganization (collectively, a “Reorganization”) upon such terms and conditions as it may deem appropriate, subject to compliance with the ISO rules under Section 422 of the Code, where applicable. Without limiting the foregoing, in the event of any Reorganization, the Committee or the Board may cause any Award outstanding as of the effective date of the Reorganization to be cancelled in consideration of a cash payment or alternate Award made to the holder of such cancelled Award equal in value to the fair market value of such cancelled Award; PROVIDED, HOWEVER, that nothing in this Section 4.4 shall permit the repricing, replacing or regranting of Options or SARs in violation of Section 18.1. Article 5. Eligibility and Participation 5.1 Eligibility. Individuals eligible to participate in this Plan include all key Employees, Trustees, and Third Party Service Providers. 5.2 Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award. Article 6. Options 6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided that ISOs may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the Treasury Regulations thereunder). No option shall be deemed to be granted until the FMV of the Shares subject to such option has been determined pursuant to Section 2.15. 6.2 Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO. 6.3 Option Price. The Option Price for each grant of an Option under this Plan shall be as determined by the Committee and shall be specified in the Award Agreement. The Option Price shall be: (i) based on one hundred percent (100%) of the FMV of the Shares on the date of grant, (ii) set at a premium to the FMV of the Shares on the date of grant, or (iii) indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion; provided, however, the Option Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares on the date of grant. PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION A-6 PRESIDENT’S LETTER 6.4 Duration of Options. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. 6.5 Exercise of Options. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant. 6.6 Payment. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price (provided that except as otherwise determined by the Committee, the Shares that are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price or have been purchased on the open market); (c) by a combination of (a) and (b); or (d) any other method approved or accepted by the Committee in its sole discretion, including, without limitation, if the Committee so determines, a cashless (broker-assisted) exercise. Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars. 6.7 Restrictions on Share Transferability. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares. 6.8 Termination of Employment. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination. 6.9 Transferability of Options. (a) Incentive Options. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under this Article 6 shall be exercisable during his lifetime only by such Participant. Nonqualified Options. Except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; provided that the Board or Committee may permit further transferability, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability. Notwithstanding anything herein to the contrary, in no event, however, may an NQSO be transferred for value (as defined in the General Instructions to Form S-8). Further, except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, or unless the Board or Committee decides to permit further transferability, all NQSOs granted to a Participant under this Article 6 shall be exercisable CORPORATE INFORMATION FORM 10-K PROXY STATEMENT (b) A-7 during his lifetime only by such Participant. With respect to those NQSOs, if any, that are permitted to be transferred to another individual, references in the Plan to exercise or payment of the Option Price by the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee. 6.10 Notification of Disqualifying Disposition. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof. 6.11. Substituting SARs. Only in the event the Company is not accounting for equity compensation under APB Opinion No. 25, the Committee shall have the ability to substitute, without receiving Participant permission, SARs paid only in Shares (or SARs paid in Shares or cash at the Committee’s discretion) for outstanding Options; provided, the terms of the substituted SARs are the same as the terms for the Options and the aggregate difference between the Fair Market Value of the underlying Shares and the Grant Price of the SARs is equivalent to the aggregate difference between the Fair Market Value of the underlying Shares and the Option Price of the Options. If, in the opinion of the Company’s auditors, this provision creates adverse accounting consequences for the Company, it shall be considered null and void. 6.12 Special ISO Rules for 10% Shareholders. If any Participant to whom an ISO is to be granted is, on the date of grant, the owner of Shares (determined using applicable attribution rules) possessing more than 10% of the total combined voting power of all classes of equity securities of his or her employer (or of its parent or subsidiary), then the following special provisions will apply to the ISO granted to that Participant: (a) The Option Price per Share of the ISO will not be less than 110% of the Fair Market Value of the Shares underlying such ISO on the date of grant; and The ISO will not have a term in excess of 5 years from the date of grant. PRESIDENT’S LETTER PROXY STATEMENT (b) Article 7. Share Appreciation Rights 7.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs. Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs. The Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement. The Grant Price shall be: (i) based on one hundred percent (100%) of the FMV of the Shares on the date of grant, (ii) set at a premium to the FMV of the Shares on the date of grant, or (iii) indexed to the FMV of the Shares on the date of grant, with the index determined by the Committee, in its discretion; provided, however, the Grant Price on the date of grant must be at least equal to one hundred percent (100%) of the FMV of the Shares on the date of grant. The Grant Price of Tandem SARs shall be equal to the Option Price of the related Option. 7.2 SAR Agreement. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine. 7.3 Term of SAR. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth (10th) anniversary date of its grant. FORM 10-K CORPORATE INFORMATION 7.4 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes. 7.5. Exercise of Tandem SARs. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable. A-8 PRESIDENT’S LETTER Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR may be for no more than one hundred percent (100%) of the excess of the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the Option Price of the underlying ISO; (c) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO; (d) the Tandem SAR may be exercised only when the underlying ISO is eligible to be exercised; and (e) the Tandem SAR is transferable only when the underlying ISO is transferable, and under the same conditions. 7.6 Payment of SAR Amount. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying: (a) (b) The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by The number of Shares with respect to which the SAR is exercised. PROXY STATEMENT At the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR. 7.7 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination. 7.8 Nontransferability of SARs. Except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Notwithstanding anything herein to the contrary, in no event, however, may a SAR be transferred for value (as defined in the General Instructions to Form S-8). Further, except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, all SARs granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant. With respect to those SARs, if any, that are permitted to be transferred to another individual, references in the Plan to exercise of the SAR by the Participant or payment of any amount to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee. 7.9 Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of a SAR for a specified period of time. Article 8. Restricted Shares and Restricted Share Units 8.1 Grant of Restricted Shares or Restricted Share Units. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Restricted Shares and/or Restricted Share Units to Participants in such amounts as the Committee shall determine. Restricted Share Units shall be similar to Restricted Shares except that no Shares are actually awarded to the Participant on the date of grant. 8.2 Restricted Shares or Restricted Share Unit Agreement. Each Restricted Share and/or Restricted Share Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Restricted Shares or the number of Restricted Share Units granted, and such other provisions as the Committee shall determine. 8.3 Transferability. Except as provided in this Plan or an Award Agreement, the Restricted Shares and/or Restricted Share Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Award Agreement (and in the case of Restricted Share Units until the date of delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by the Committee, in its sole discretion, and set forth in the Award Agreement or otherwise at any time by the Committee. All rights with respect to the Restricted Shares and/or CORPORATE INFORMATION FORM 10-K A-9 Restricted Share Units granted to a Participant under the Plan shall be available during his lifetime only to such Participant, except as otherwise provided in an Award Agreement or at any time by the Committee. 8.4 Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Restricted Shares or Restricted Share Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Restricted Share or each Restricted Share Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Share or Restricted Share Units. To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Restricted Shares in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse. Except as otherwise provided in this Article 8, Restricted Shares covered by each Restricted Share Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Share Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine. 8.5 Certificate Legend. In addition to any legends placed on certificates pursuant to Section 8.4, each certificate representing Restricted Shares granted pursuant to the Plan may bear a legend such as the following or as otherwise determined by the Committee in its sole discretion: “The sale or transfer of Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Amended and Restated Glimcher Realty Trust 2004 Incentive Compensation Plan (the “Plan”), and in the associated Award Agreement. A copy of the Plan and such Award Agreement may be obtained from Glimcher Realty Trust.” PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K 8.6 Voting Rights. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by law, as determined by the Committee, Participants holding Restricted Shares granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Share Units granted hereunder. 8.7 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted Shares and/or Restricted Share Units following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Restricted Shares or Restricted Share Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination. 8.8 Section 83(b) Election. The Committee may provide in an Award Agreement that the Award of Restricted Shares is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Share Award, the Participant shall be required to file promptly a copy of such election with the Company. Article 9. Performance Units/Performance Shares 9.1 Grant of Performance Units/Performance Shares. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine. 9.2 Value of Performance Units/Performance Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant. CORPORATE INFORMATION A-10 PRESIDENT’S LETTER 9.3 Earning of Performance Units/Performance Shares. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout on the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. 9.4 Form and Timing of Payment of Performance Units/Performance Shares. Payment of earned Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award. 9.5 Termination of Employment. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination. 9.6 Nontransferability. Except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, Performance Units/Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, a Participant’s rights under the Plan shall be exercisable during his lifetime only by such Participant. Article 10. Cash-Based Awards and Other Share-Based Awards 10.1 Grant of Cash-Based Awards. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms, including the achievement of specific performance goals, as the Committee may determine. 10.2 Other Share-Based Awards. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States. 10.3 Value of Cash-Based and Other Share-Based Awards. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Share-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Share-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met. 10.4 Payment of Cash-Based Awards and Other Share-Based Awards. Payment, if any, with respect to a Cash-Based Award or an Other Share-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines. 10.5 Termination of Employment. The Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards or Other Share-Based Awards following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an Award Agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards or Other Share-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT A-11 10.6 Nontransferability. Except as otherwise determined by the Committee, neither Cash-Based Awards nor Other Share-Based Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided by the Committee, a Participant’s rights under the Plan, if exercisable, shall be exercisable during his lifetime only by such Participant. With respect to those Cash-Based Awards or Other Share-Based Awards, if any, that are permitted to be transferred to another individual, references in the Plan to exercise or payment of such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee. Article 11. Performance Measures 11.1. General. (a) Certain Awards granted under the Plan may be granted in a manner such that the Awards qualify as Performance-Based Compensation and thus be exempt from the deduction limitation imposed by Section 162(m) of the Code. Awards shall only qualify as Performance-Based Compensation if, among other things, at the time of grant the Committee is comprised solely of two or more “outside directors” (as such term is used in Section 162(m) of the Code and the Treasury Regulations thereunder). Awards intended to qualify as Performance-Based Compensation may be granted to Participants who are or may be Covered Employees at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number, amount and timing of awards granted to each Covered Employee. The Committee shall set performance goals at its discretion which, depending on the extent to which they are met, will determine the number and/or value of Awards intended to qualify as Performance-Based Compensation that will be paid out to the Covered Employees, and may attach to such Performance-Based Compensation one or more restrictions. PRESIDENT’S LETTER PROXY STATEMENT (b) (c) 11.2. Other Awards. Either the granting or vesting of Awards intended to qualify as Performance-Based Compensation (other than Options or SARs) granted under the Plan shall be subject to the achievement of a performance target or targets, as determined by the Committee in its sole discretion, based on one or more of the performance measures specified in Section 11.3 below. With respect to such Performance-Based Compensation: (a) the Committee shall establish in writing (x) the objective performance-based goals applicable to a given period and (y) the individual Covered Employees or class of Covered Employees to which such performance-based goals apply no later than 90 days after the commencement of such period (but in no event after 25 percent of such period has elapsed); no Performance-Based Compensation shall be payable to or vest with respect to, as the case may be, any Covered Employee for a given period until the Committee certifies in writing that the objective performance goals (and any other material terms) applicable to such period have been satisfied; and after the establishment of a performance goal, the Committee shall not revise such performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code) upon the attainment of such performance goal. FORM 10-K (b) (c) CORPORATE INFORMATION 11.3 Performance Measures. Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Article 11, the performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to one or more of the following Performance Measures: (a) (b) (c) (d) (e) (f) (g) Net earnings or net income (before or after taxes); Funds from operations (FFO); Occupancy rates; Earnings per share; Net sales growth; Net operating profit; Return measures (including, but not limited to, return on assets, capital, invested capital, equity, or sales); A-12 PRESIDENT’S LETTER (h) Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital); (i) Earnings before or after taxes, interest, depreciation, and/or amortization; (j) Gross or operating margins; (k) Productivity ratios; (l) Share price (including, but not limited to, growth measures and total shareholder return); and (m) Dividend distributions (including, but not limited to, growth in or maintenance of dividends on the Shares). Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of REIT peer companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (1) above as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of performance goals pursuant to the Performance Measures specified in this Article 11. PROXY STATEMENT 11.4 Evaluation of Performance. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility. 11.5 Adjustment of Performance-Based Compensation. Awards intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines. 11.6 Committee Discretion. In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 11.1. Article 12. Nonemployee Trustee Awards All Awards to Nonemployee Trustees shall be determined by the Board or the Committee. The terms and conditions of any grant to any such Nonemployee Trustee shall be set forth in an Award Agreement. Article 13. Dividend Equivalents Any Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award (other than Options or SARs), to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Article 14. Beneficiary Designation Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate. CORPORATE INFORMATION FORM 10-K A-13 Article 15. Deferrals The Committee may permit or require a Participant to defer such Participant’s receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or SAR, the lapse or waiver of restrictions with respect to Restricted Shares or Restricted Share Units, or the satisfaction of any requirements or performance goals with respect to Performance Shares, Performance Units, Cash- Based Awards, Covered Employee Annual Incentive Awards, Other Share-Based Awards, or Cash-Based Awards. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. Notwithstanding the foregoing any such deferral election shall be made and administered in a manner which shall avoid the imposition of additional taxes under Section 409A of the Code. Article 16. Rights of Participants 16.1 Employment. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries, to terminate any Participant’s employment or service on the Board or to the Company at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as a Trustee or Third Party Service Provider for any specified period of time. PRESIDENT’S LETTER PROXY STATEMENT Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 18, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries. 16.2 Participation. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. 16.3 Rights as a Shareholder. Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares. Article 17. Change of Control In addition to the terms and conditions of this Plan, one or more Awards may be subject to the terms and conditions set forth in a written agreement between the Company and a Participant providing for different terms or provisions with respect to such Awards upon a “Change of Control” of the Company (as that term may be defined in such written agreement), including but not limited to acceleration of benefits, lapsing of restrictions, vesting of benefits and such other terms, conditions or provisions as may be contained in such written agreement; provided however, that such written agreement may not increase the maximum amount of such Awards. Article 18. Amendment, Modification, Suspension, and Termination 18.1 Amendment, Modification, Suspension, and Termination. Subject to Section 18.3, the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan and any Award Agreement in whole or in part; provided, however, that, without the prior approval of the Company’s shareholders and except as provided in Sections 4.4 and 6.11, Options or SARs issued under the Plan will not be repriced, replaced (with any other Awards), or regranted through cancellation, or by lowering the Option Price of a previously granted Option or the Grant Price of a previously granted SAR, and no amendment of the Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule. 18.2 Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan. FORM 10-K CORPORATE INFORMATION A-14 PRESIDENT’S LETTER 18.3 Awards Previously Granted. Notwithstanding any other provision of the Plan to the contrary, no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award. Article 19. Withholding The Company shall have the right to withhold from a Participant (or a permitted assignee thereof), or otherwise require such Participant or assignee to pay, any Withholding Taxes arising as a result of the grant of any Award, exercise of an Option or SAR, lapse of restrictions with respect to Restricted Shares or Restricted Share Units, or any other taxable event occurring pursuant to this Plan or any Award Agreement. If the Participant (or a permitted assignee thereof) shall fail to make such tax payments as are required, the Company (or its Affiliates or Subsidiaries) shall, to the extent permitted by law, have the right to deduct any such Withholding Taxes from any payment of any kind otherwise due to such Participant or to take such other action as may be necessary to satisfy such Withholding Taxes. In satisfaction of the requirement to pay Withholding Taxes, the Participant (or permitted assignee) may make a written election which may be accepted or rejected in the discretion of the Committee, (i) to have withheld a portion of any Shares or other payments then issuable to the Participant (or permitted assignee) pursuant to any Award, or (ii) to tender other Shares to the Company (either by actual delivery or attestation, in the sole discretion of the Committee, provided that, except as otherwise determined by the Committee, the Shares that are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price or have been purchased on the open market), in either case having an aggregate Fair Market Value equal to the Withholding Taxes. Article 20. Successors All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. Article 21. General Provisions 21.1 Forfeiture Events. (a) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of employment for cause, termination of the Participant’s provision of services to the Company, Affiliate, and/or Subsidiary, violation of material Company, Affiliate, and/or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, its Affiliates, and/or its Subsidiaries. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the Participant knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever just occurred) of the financial document embodying such financial reporting requirement. FORM 10-K PROXY STATEMENT (b) CORPORATE INFORMATION 21.2 Legend. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares. 21.3 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural. 21.4 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. A-15 21.5 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. PRESIDENT’S LETTER 21.6 Delivery of Title. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to: (a) Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. (b) 21.7 Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 21.8 Investment Representations. The Committee may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares. 21.9 Employees Based Outside of the United States. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees, Trustees, or Third Party Service Providers, the Committee, in its sole discretion, shall have the power and authority to: (a) (b) Determine which Affiliates and Subsidiaries shall be covered by the Plan; Determine which Employees, Trustees, or Third Party Service Providers outside the United States are eligible to participate in the Plan; Modify the terms and conditions of any Award granted to Employees, Trustees, or Third Party Service Providers outside the United States to comply with applicable foreign laws; Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 21.9 by the Committee shall be attached to this Plan document as appendices; and Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals. PROXY STATEMENT FORM 10-K (c) (d) (e) Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law. 21.10 Uncertificated Shares. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange. CORPORATE INFORMATION A-16 PRESIDENT’S LETTER 21.11 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, its Subsidiaries, and/or its Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company, its Subsidiaries, and/or its Affiliates under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. 21.12 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated. PROXY STATEMENT 21.13 Retirement and Welfare Plans. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit. 21.14 Nonexclusivity of the Plan. The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant. 21.15 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or, (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate. 21.16 Governing Law. The Plan and each Award Agreement shall be governed by the laws of the State of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of New York, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement. 21.17 Indemnification. Each individual who is or shall have been a member of the Board, or a committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Article 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf, unless such loss, cost, liability, or expense is a result of his own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. CORPORATE INFORMATION FORM 10-K A-17 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 PRESIDENT’S LETTER FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2006 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-12482 GLIMCHER REALTY TRUST (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 150 East Gay Street Columbus, Ohio (Address of principal executive offices) Registrant’s telephone number, including area code: (614) 621-9000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Shares of Beneficial Interest, par value $0.01 per share 8 ¾% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share 8 ⅛% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest, par value $0.01 per share _____________________________________ Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [_] Indicated by check mark if the Registrant is not required to file reports pursuant to Section 12 or Section 15(d) of the Securities Exchange Act of 1934. Yes [_] 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 [_] 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, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One): Large accelerated filer [X] Accelerated filer [_] Non-accelerated filer [_] Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of February 22, 2007, there were 36,787,254 Common Shares of Beneficial Interest outstanding, par value $0.01 per share. The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of the Registrant’s Common Shares of Beneficial Interest as quoted on the New York Stock Exchange on June 30, 2006, was $891,387,425. Name of each exchange on which registered New York Stock Exchange New York Stock Exchange New York Stock Exchange FORM 10-K PROXY STATEMENT 31-1390518 (I.R.S. Employer Identification No.) 43215 (Zip Code) CORPORATE INFORMATION Documents Incorporated By Reference Portions of the Glimcher Realty Trust Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting of Shareholders to be held on May 11, 2007 are incorporated by reference into Part III of this Report. TABLE OF CONTENTS PRESIDENT’S LETTER Item No. PART I 1. 1A. 1B. 2. 3. 4. Form 10-K Report Page Business....................................................................................................................................... Risk Factors................................................................................................................................. Unresolved Staff Comments........................................................................................................ Properties..................................................................................................................................... Legal Proceedings ....................................................................................................................... Submission of Matters to a Vote of Security Holders ................................................................. PART II 3 6 12 12 19 19 PROXY STATEMENT 5. 6. 7. 7A. 8. 9. 9A. 9B. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities................................................................................................ Selected Financial Data ............................................................................................................... Management’s Discussion and Analysis of Financial Condition and Results of Operations ....... Quantitative and Qualitative Disclosures About Market Risk ..................................................... Financial Statements and Supplementary Data............................................................................ Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....... Controls and Procedures.............................................................................................................. Other Information........................................................................................................................ PART III 19 19 21 39 39 39 40 42 FORM 10-K 10. 11. 12. 13. 14. 15. Trustees, Executive Officers and Corporate Governance............................................................ Executive Compensation ............................................................................................................. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ..................................................................................................................................... Certain Relationships and Related Transactions, and Trustee Independence.............................. Principal Accounting Fees and Services...................................................................................... Exhibits and Financial Statement Schedules ............................................................................... 42 42 42 42 42 43 50 Signatures................................................................................................................................................. CORPORATE INFORMATION PART I PRESIDENT’S LETTER This Form 10-K, together with other statements and information publicly disseminated by Glimcher Realty Trust (“GRT” or the “Registrant”), contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on assumptions and expectations which may not be realized and are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, may differ from the results discussed in the forward-looking statements. Risks and other factors that might cause differences, some of which could be material, include, but are not limited to: the effect of economic and market conditions; failure to increase mall store occupancy and same-mall operating income; tenant bankruptcies; bankruptcies of joint venture partners; rejection of leases by tenants in bankruptcy; the failure to qualify as a REIT (as hereinafter defined); failure to consummate financing, including the repayment of debt; financing and development risks, including lack of satisfactory equity and debt financing, construction and lease-up delays and cost overruns; the level and volatility of interest rates; increases in and new impairment charges; the consummation of asset sales at acceptable prices; the financial stability of tenants within the retail industry; the rate of revenue increases versus expense increases; the failure of the closing of the sale of properties to take place from time to time; the failure to attract innovative retailers; the failure to complete proposed acquisitions; the failure to sell properties as anticipated and the failure to achieve estimated sales prices and proceeds from the sale of such properties; the failure to achieve earnings and funds from operations targets or estimates; conflicts of interest with existing joint venture partners; the failure to complete planned redevelopments of properties; the failure of the Company to make additional investments in regional mall properties and redevelopment of properties; the failure of joint venture relationships; and the failure to fully recover tenant obligations for common area maintenance (“CAM”), taxes and other property expenses, as well as other risks listed from time to time in this Form 10-K and in GRT’s other reports filed with the Securities and Exchange Commission (“SEC”). Item 1. Business (a) General Development of Business PROXY STATEMENT GRT, Glimcher Properties Limited Partnership (the “Operating Partnership,” “OP” or “GPLP”) and entities directly or indirectly owned or controlled by GRT, on a consolidated basis, are hereinafter referred to as the “Company,” “we,” “us” or “our.” GRT is a fully-integrated, self-administered and self-managed Maryland real estate investment trust (“REIT”) which was formed on September 1, 1993 to continue the business of The Glimcher Company (“TGC”) and its affiliates, of owning, leasing, acquiring, developing and operating a portfolio of retail properties consisting of regional and super regional malls and community shopping centers. Enclosed regional and super regional malls in which we hold an ownership position (including joint venture interests) are referred to as “Malls” and community shopping centers in which we hold an ownership position are referred to as “Community Centers.” The Malls and Community Centers may from time to time be individually referred to herein as a “Property” and collectively referred to herein as the “Properties.” On January 26, 1994, GRT consummated an initial public offering (the “IPO”) of 18,198,000 of its common shares of beneficial interest (the “Common Shares”) including 2,373,750 over allotment option shares. The net proceeds of the IPO were used by GRT primarily to acquire (at the time of the IPO) an 86.2% interest in the Operating Partnership, a Delaware limited partnership of which Glimcher Properties Corporation (“GPC”), a Delaware corporation and a wholly owned subsidiary of GRT, is sole general partner. At December 31, 2006, GRT held a 91.9% interest in the Operating Partnership. The Company does not engage or pay a REIT advisor. Management, leasing, accounting, legal, design and construction supervision expertise is provided through its own personnel, or, where appropriate, through outside professionals. (b) Narrative Description of Business FORM 10-K CORPORATE INFORMATION General: The Company is a recognized leader in the ownership, management, acquisition and development of regional and super-regional malls. At December 31, 2006, the Properties consisted of 26 Malls (24 wholly-owned and 2 partially owned through a joint venture) containing an aggregate of 23.7 million square feet of gross leasable area (“GLA”) and 4 Community Centers containing an aggregate of 1.0 million square feet of GLA. For purposes of computing occupancy statistics, anchors are defined as tenants whose space is equal to or greater than 20,000 square feet of GLA. This definition is consistent with the industry’s standard definition determined by the International Council of Shopping Centers (“ICSC”). All tenant spaces less than 20,000 square 3 feet and outparcels are considered to be stores. The Company computes occupancy on an economic basis, which means only those spaces where the store is open or the tenant is paying rent are considered as occupied. The Company includes GLA for certain anchors and outparcels that are owned by third parties. Mall anchors, which are owned by third parties and are open and/or are obligated to pay the Company charges, are considered occupied when reporting occupancy statistics. Community Center anchors owned by third parties are excluded from the Company’s GLA. These differences in treatment between Malls and Community Centers are consistent with industry practice. Outparcels at both Community Center and Mall Properties are included in GLA if the Company owns the land or building. The outparcels where a third party owns the land and buildings, but contributes nominal ancillary charges are excluded from GLA. As of December 31, 2006, the occupancy rate for all of the Properties was 92.8% of GLA. The occupied GLA was leased at 84.8%, 8.0% and 7.2% to national, regional and local retailers, respectively. The Company’s focus is to maintain high occupancy rates for the Properties by capitalizing on management’s long-standing relationships with national and regional tenants and its extensive experience in marketing to local retailers. PRESIDENT’S LETTER PROXY STATEMENT As of December 31, 2006, the Properties had annualized minimum rents of $235.1 million. Approximately 79.1%, 7.3% and 13.6% of the annualized minimum rents of the Properties as of December 31, 2006 were derived from national, regional and local retailers, respectively. No single tenant represents more than 5.0% of the aggregate annualized minimum rents of the Properties as of December 31, 2006. Malls: The Malls provide a broad range of shopping alternatives to serve the needs of customers in all market segments. Each Mall is anchored by multiple department stores such as Belk’s, The Bon-Ton, Boscov’s, Dillard’s, Elder-Beerman, JCPenney, Kohl’s, Macy’s, Nordstrom, Parisian, Saks, Sears and Von Maur. Mall stores, most of which are national retailers, include Abercrombie & Fitch, American Eagle Outfitters, Banana Republic, Barnes & Noble, Bath & Body Works, The Disney Store, Finish Line, Foot Locker, Gap, Hallmark, Kay Jewelers, The Limited, Limited Express, New York and Company, Old Navy, Pacific Sunwear, Radio Shack, Victoria’s Secret, Waldenbooks and Zales Jewelers. To provide a complete shopping, dining and entertainment experience, the Malls generally have at least one theme restaurant, a food court which offers a variety of fast food alternatives, and, in certain Malls, multiple screen movie theaters and other entertainment activities. The largest operating Mall has 1.6 million square feet of GLA and approximately 160 stores, while the smallest has 442,000 square feet of GLA and approximately 60 stores. The Malls also have additional restaurants and retail businesses, such as P.F. Chang’s, The Palm, Red Lobster, Best Buy and Pier One, located along the perimeter of the parking areas. As of December 31, 2006, the Malls accounted for 95.8% of the total GLA, 96.3% of the aggregate annualized minimum rents of the Properties and had an overall occupancy rate of 93.3%. Community Centers: The Company’s Community Centers are designed to attract local and regional area customers and are typically anchored by a combination of discount department stores, supermarkets or drug stores (“Community Anchors”) which attract shoppers to each center’s smaller shops. The tenants at the Company’s Community Centers typically offer day-to-day necessities and value-oriented merchandise. Community Anchors include nationally recognized retailers such as JCPenney and Kmart, and supermarkets such as Kroger. Many of the Community Centers have retail businesses or restaurants located along the perimeter of the parking areas. As of December 31, 2006, Community Centers accounted for 4.2% of the total GLA, 3.7% of the aggregate annualized minimum rents of the Properties and had an overall occupancy rate of 82.2%. CORPORATE INFORMATION FORM 10-K Growth Strategies and Operating Policies: Management of the Company believes per share growth in both net income and funds from operations (“FFO”) are important factors in enhancing shareholder value. The Company believes that the presentation of FFO provides useful information to investors and a relevant basis for comparison among REITS. Specifically, the Company believes that FFO is a supplemental measure of the Company’s operating performance as it is a recognized standard in the real estate industry, in particular, real estate investment trusts. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as net income (loss) available to common shareholders (computed in accordance with Generally Accepted Accounting Principles (“GAAP”)), excluding gains or losses from sales of depreciable property, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. FFO does include impairment losses for properties held for use and held-for-sale. The Company’s FFO may not be directly comparable to similarly titled measures reported by other real estate investment trusts. FFO does not represent cash flow from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of the Company’s financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor is it indicative of funds 4 available to fund the Company’s cash needs, including its ability to make cash distributions. A reconciliation of FFO to net income available to common shareholders is provided in Item 7 of this Form 10-K. GRT intends to operate in a manner consistent with the requirements of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to REITs and related regulations with respect to the composition of the Company’s portfolio and the derivation of income unless, because of circumstances or changes in the Code (or any related regulation), the trustees of GRT determine that it is no longer in the best interests of GRT to qualify as a REIT. The Company’s acquisition strategies are to selectively acquire strategically located properties in markets where management has extensive operating experience and/or have significant growth potential. Such strategy is focused on dominant anchored retail properties within the top 100 metropolitan markets by population that have near-term upside potential or offer advantageous opportunities for the Company. The following factors, among others, are considered by the Company in making acquisitions: (i) the geographic area and type of property; (ii) the location, construction quality, condition and design of the property; (iii) the current FFO generated by the property and the ability to increase FFO through property repositioning and proactive management of the tenant base; (iv) the potential for capital appreciation; (v) the terms of tenant leases; (vi) the existing tenant mix at the property; (vii) the potential for economic growth and the tax and regulatory environment of the communities in which the property is located; (viii) the occupancy rates and demand by tenants for properties of similar type in the vicinity; and (ix) the prospects for financing or refinancing the property. The Company acquires and develops its Properties as long-term investments. Therefore, its focus is to provide for regular maintenance of its Properties and to conduct periodic renovations and refurbishments to preserve and increase Property values while also increasing the retail sales prospects of its tenants. The projects usually include renovating existing facades, installing uniform signage, updating interior decor, replacement of roofs and skylights, resurfacing parking lots and increasing parking lot lighting. To meet the needs of existing or new tenants and changing consumer demands, the Company also reconfigures and expands its Properties, including utilizing land available for expansion and development of outparcels or the addition of new anchors. In addition, the Company works closely with its tenants to renovate their stores and enhance their merchandising capabilities. Financing Strategies: At December 31, 2006, the Company had a total-debt-to-total-market capitalization ratio of 55.3% based upon the closing price of the Common Shares on the New York Stock Exchange as of December 31, 2006. The Company is working to maintain this ratio in the mid-fifty percent range by managing outstanding debt and increasing the value of its outstanding Common Shares. The Company expects that it may, from time to time, re-evaluate its policy with respect to its ratio of total-debt-to-total-market capitalization in light of then current economic conditions; relative costs of debt and equity capital; market values of its Properties; acquisition, development and expansion opportunities; and other factors, including meeting the taxable income distribution requirement for REITs under the Code, in the event the Company has taxable income without receipt of cash sufficient to enable the Company to meet such distribution requirements. The Company’s preference is to obtain fixed rate, long-term debt for its Properties. At December 31, 2006, 85.6% of total Company debt was fixed rate. Shorter term and variable rate debt typically is employed for Properties anticipated to be expanded or redeveloped. Competition: All of the Properties are located in areas that have shopping centers and/or malls and other retail facilities. Generally, there are other retail properties within a five-mile radius of a Property. The amount of rentable retail space in the vicinity of the Company’s Properties could have a material adverse effect on the amount of rent charged by the Company and on the Company’s ability to rent vacant space and/or renew leases of such Properties. There are numerous commercial developers, real estate companies and major retailers that compete with the Company in seeking land for development, properties for acquisition and tenants for properties, some of which may have greater financial resources than the Company and more operating or development experience than that of the Company. There are numerous shopping facilities that compete with the Company’s Properties in attracting retailers to lease space. In addition, retailers at the Properties may face increasing competition from e-commerce, outlet malls, discount shopping clubs, catalog companies, direct mail, telemarketing and home shopping networks. Employees: were part-time. At December 31, 2006, the Company had an aggregate of 1,168 employees, of which 565 PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION Seasonality: The shopping center industry is seasonal in nature, particularly in the Company’s fourth quarter during the holiday season when retailer occupancy and retail sales are typically at their highest levels. In addition, shopping malls achieve a substantial portion of their specialty (temporary retailer) rents during the holiday season. 5 PROXY STATEMENT Tax Status: GRT believes it has been organized and operated in a manner that qualifies for taxation as a REIT and intends to continue to be taxed as a REIT under Sections 856 through 860 of the Code. As such, GRT generally will not be subject to federal income tax to the extent it distributes at least 90.0% of its REIT ordinary taxable income to its shareholders. Additionally, the Company must satisfy certain requirements regarding its organization, ownership and certain other requirements, such as a requirement that its shares be transferable. Moreover, the Company must meet certain tests regarding its income and assets. At least 75.0% of the Company’s gross income must be derived from passive income closely connected with real estate activities. In addition, 95.0% of the Company’s gross income must be derived from these same sources, plus dividends, interest and certain capital gains. To meet the asset test, at the close of each quarter of the taxable year, at least 75.0% of the value of the total assets must be represented by real estate assets, cash and cash equivalent items (including receivables), and government securities. Additionally, to qualify as a REIT, there are several rules limiting the amount and type of securities that GRT can own, including the requirement that not more than 25.0% of the value of its total assets can be represented by securities. If GRT fails to meet the requirements to qualify for REIT status, the Company may cease to qualify as a REIT and may be subject to certain penalty taxes. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. As a qualified REIT, the Company is subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed income. (c) Available information PRESIDENT’S LETTER GRT files this Form 10-K and other periodic reports and statements electronically with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information provided by issuers at http://www.sec.gov. GRT’s reports, including amendments, are also available free of charge on its website, www.glimcher.com, as soon as reasonably practical after such reports are filed with the SEC. Information on this website is not considered part of this filing. GRT’s Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Senior Financial Officers, Audit Committee Charter, Amended and Restated Executive Compensation Committee Charter and Amended and Restated Nominating and Corporate Governance Committee Charter are available on the Company’s website and copies of each are available in print to any shareholder who requests them. Item 1A. Risk Factors There are a number of factors that affect our business and the results of our operations, many of which are beyond our control. The following is a description of the most significant factors that might cause the actual results of operations in future periods to differ materially from those currently expected or desired. We are subject to risks inherent in owning real estate investments. Real property investments are subject to varying degrees of risk. Our ability to make dividend distributions may be adversely affected by the economic climate and certain local conditions including: ● ● oversupply of space or reduced demand for rental space and newly developed properties; the attractiveness of our properties compared to other retail space; our ability to provide adequate maintenance to our properties; and fluctuations in real estate taxes, insurance and other operating costs. CORPORATE INFORMATION FORM 10-K ● ● Applicable laws, including tax laws, interest rate levels and the availability of financing, may adversely affect our income and real estate values. In addition, real estate investments are relatively illiquid and, therefore, our ability to sell our properties quickly may be limited. We cannot be sure that we will be able to lease space as tenants move out or as to the rents we may be able to charge new tenants at such space. Our insurance coverage in the future may not include adequate amounts of terrorism insurance. Our all risk property insurance policies include coverage for foreign and domestic acts of terrorism on our consolidated real estate assets through January 1, 2008. In the future, insurers may limit the amount of coverage available to us for terrorism insurance on our properties (or we may not be able to obtain such insurance at all), or 6 the cost of property and liability insurance policies including coverage for acts of terrorism may be unreasonable. As a result, there can be no assurance that we will be able to obtain adequate amounts of terrorism insurance on our properties after January 1, 2008 or, if we can, that the premiums for the insurance will be reasonable. We rely on major tenants. At December 31, 2006, our three largest tenants were Gap, Inc., Foot Locker, Inc. and Limited Brands, Inc., representing 3.0%, 2.7% and 2.6% of our annualized minimum rents, respectively. No other tenant represented more than 2.0% of the aggregate annualized minimum rents of our properties as of such date. Our financial position and ability to make distributions may be adversely affected by the bankruptcy, insolvency, or general downturn in the business of any such tenant, or in the event any such tenant does not renew a number of its leases as they expire. Bankruptcy of our tenants or downturns in our tenants’ businesses may reduce our cash flow. Since we derive almost all of our income from rental payments, our cash available for distribution would be adversely affected if a significant number of our tenants were unable to meet their obligations to us, or if we were unable to lease vacant space in our properties on economically favorable terms. A tenant may seek the protection of the bankruptcy laws, which could result in the termination of its lease causing a reduction in our cash available for distribution. A downturn in a tenant’s business may result in a reduction in the rent based on a percentage of the tenant’s sales. Furthermore, certain of our tenants, including anchor tenants, hold the right under their lease(s) to terminate their lease(s) or reduce their rental rate if certain occupancy conditions are not met, if certain anchor tenants close, if certain sales levels or profit margins are not achieved, or if an exclusive use provision is violated. We face significant competition that may decrease the occupancy and rental rates of our properties. We compete with many commercial developers, real estate companies and major retailers. Some of these entities develop or own malls, value-oriented retail properties and community shopping centers that compete for tenants. We face competition for prime locations and for tenants. New regional malls or other retail shopping centers with more convenient locations or better rents may attract tenants or cause them to seek more favorable lease terms at or prior to renewal. Retailers at our properties may face increasing competition from other retailers, ecommerce, outlet malls, discount shopping clubs, catalog companies, direct mail, telemarketing and home shopping networks all of which could affect their ability to pay rent or desire to occupy the property. The failure to fully recover from tenants cost reimbursements for CAM, taxes and insurance could adversely affect our operating results. The computation of cost reimbursements from tenants for CAM, insurance and real estate taxes is complex and involves numerous judgments including interpretation of terms and other tenant lease provisions. Most tenants make monthly fixed payments of CAM, real estate taxes and other cost reimbursements items. After the end of the calendar year, we compute each tenant’s final cost reimbursements and issue a bill or credit for the full amount, after considering amounts paid by the tenants during the year. Final adjustments for the year ended December 31, 2006 have not yet been determined. At December 31, 2006, we had recorded in accounts receivables $3.3 million of costs expected to be recovered from tenants during the first six months of 2007. There can be no assurance that we will collect all or substantially all of this amount. PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION The results of operations for our properties depend on the economic conditions of the regions of the United States in which they are located. Our results of operations and distributions to you will be subject generally to economic conditions in the regions in which our properties are located. For the year ended December 31, 2006, approximately 33% of annualized minimum rents came from our properties located in Ohio. We may be unable to successfully develop properties or operate developed properties. As a result of economic and other conditions and required government approvals, development projects may not be pursued or may be completed later or with higher costs than anticipated. Development activities involve significant risks, including: • the expenditure of funds on and devotion of time to projects which may not come to fruition; 7 • PRESIDENT’S LETTER increased construction costs, possibly making the project uneconomical; an inability to obtain construction financing and permanent financing on favorable terms; and occupancy rates and rents not sufficient to make a project profitable. • • In the event of an unsuccessful development project, our loss could exceed our investment in the project. We could incur significant costs related to environmental issues. Under some environmental laws, a current or previous owner or operator of real property, and parties that generate or transport hazardous substances that are disposed of on real property, may be liable for the costs of investigating and remediating these substances on or under the property. In connection with the ownership or operation of our properties, we could be liable for such costs which could be substantial and even exceed the value of such property or the value of our aggregate assets. The failure to remediate toxic substances may adversely affect our ability to sell or rent any of our properties or to borrow funds. In addition, environmental laws may require us to expend substantial sums in order to use our properties or operate our business. We have established a contingency reserve for one environmental matter as noted in Note 13 of our consolidated financial statements. Our assets may be subject to impairment charges that may materially affect our financial results. We evaluate our real estate assets and other assets for impairment indicators whenever events or changes in circumstances indicate that recoverability of our investment in the asset is not assured. This evaluation is conducted periodically, but no less frequently than quarterly. Our determination of whether a particular held-for-use asset is impaired is based upon the undiscounted projected cash flows used for the impairment analysis and our determination of the asset’s estimated fair value that in turn are based upon our plans for the respective asset and our views of market and economic conditions. With respect to assets held-for-sale, our determination of whether such an asset is impaired is based upon market and economic conditions. If we determine that a significant impairment has occurred, then we would be required to make an adjustment to the net carrying value of the asset, which could have a material adverse effect on our results of operations and funds from operations in the period in which the adjustment is made. Furthermore, changes in estimated future cash flows due to a change in our plans or views of market and economic conditions could result in the recognition of additional impairment losses for already impaired assets, which, under the applicable accounting guidance, could be substantial. We may incur significant costs of complying with the Americans with Disabilities Act and similar laws. We may be required to expend significant sums of money to comply with the Americans with Disabilities Act of 1990, as amended (“ADA”), and other federal and local laws in order for our properties to meet requirements related to access and use by disabled persons. We may incur additional costs when complying with the ADA in the future. Our failure to qualify as a REIT would have serious adverse consequences. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT GRT believes that it has qualified as a REIT under the Code, since 1994, but cannot be sure that it will remain so qualified. Qualification as a REIT involves the application of highly technical and complex Code provisions, and the determination of various factual matters and circumstances not entirely within GRT’s control that may impact GRT’s ability to qualify as a REIT under the Code. In addition, GRT cannot be sure that new laws, regulations and judicial decisions will not significantly change the tax laws relating to REITs, or the federal income tax consequences of REIT qualification. If GRT fails to qualify as a REIT, it will be subject to federal income tax (including any applicable alternative minimum tax) on taxable income at regular corporate income tax rates. Additionally, unless entitled to relief under certain statutory provisions, GRT will also be disqualified from electing to be treated as a REIT for the four taxable years following the year during which the qualification is lost, thereby reducing net earnings available for investment or distribution to you because of the additional tax liability imposed for the year or years involved. Lastly, GRT would no longer be required by the Code to make any dividend distributions as a condition to REIT 8 qualification. To the extent that dividend distributions to you may have been made in anticipation of qualifying as a REIT, we might be required to borrow funds or to liquidate certain of our investments to pay the applicable tax. Our ownership interests in certain partnerships and other ventures are subject to certain tax risks. Some of our property interests and other investments are made or held through entities in which we have an interest (the “Subsidiary Partnerships”). The tax risks of this type of ownership include possible challenge by the Internal Revenue Service of allocations of income and expense items which could affect the computation of our taxable income, or a challenge to the status of any such entities as partnerships (as opposed to associations taxable as corporations) for federal income tax purposes, as well as the possibility of action being taken by such entities that could adversely affect GRT’s qualification as a REIT, for example, by requiring the sale of a property. We believe that the entities in which we have an interest have been and will be treated for tax purposes as partnerships (and not treated as associations taxable as corporations). If our ownership interest in any entity taxable as a corporation exceeded 10% (in terms of vote or value) of such entity’s outstanding securities (unless such entity were a “taxable REIT subsidiary,” or a “qualified REIT subsidiary,” as those terms are defined in the Code) or the value of interest in any such entity exceeded 5% of the value of our assets, then GRT would cease to qualify as a REIT; distributions from any of these entities would be treated as dividends, to the extent of earnings and profits, and we would not be able to deduct our share of losses, if any, generated by such entity in computing our taxable income. We may not have access to other sources of funds necessary to meet our REIT distribution requirements. In order to qualify to be taxed as a REIT, we must make annual distributions to our shareholders of at least 90% of our taxable income (determined by excluding any net capital gain). The amount available for distribution will be affected by a number of factors, including the operation of our properties. We have sold a number of noncore assets and intend in the future to sell additional selected non-core assets. The loss of rental income associated with our properties sold will in turn affect net income and FFO. In order to maintain REIT status, we may be required to make distributions in excess of net income and FFO. In such a case, it may be necessary to arrange for short-term (or possibly long-term) borrowings, or to issue preferred or other securities, to raise funds, which may not be possible. Debt financing could adversely affect our performance. As of December 31, 2006, we had $1.6 billion of combined mortgage indebtedness and outstanding borrowings under our credit facility, of which $107.2 million matures during 2007. After the payoff of a $25.0 million loan on January 22, 2007, $82.2 million remains scheduled to mature in 2007. As of December 31, 2006, we have borrowed $272.0 million from our credit facility, which matures on December 13, 2009. A number of our outstanding loans will require lump sum or “balloon” payments for the outstanding principal balance at maturity, and we may finance future investments that may be structured in the same manner. Our ability to repay indebtedness at maturity, or otherwise, may depend on our ability to either refinance such indebtedness or to sell our properties. If we are unable to repay any of our debt at or before maturity, then we may have to borrow against our properties that are not encumbered or from our credit facility, to the extent it has availability thereunder, to make such repayments. In addition, a lender could foreclose on one or more of our properties to collect its debt. This could cause us to lose part or all of our investment, which could reduce the value of the Common Shares and the distributions payable to you. Certain of our financing arrangements contain limitations on the amount of debt that we may incur. Our $470 million unsecured credit facility is the most restrictive of our financing arrangements. Accordingly, at December 31, 2006, the additional amount that may be borrowed from this facility or other sources based upon the restrictive covenants in the credit facility is $318.4 million. Additional amounts could be borrowed as long as we maintain a ratio of total-debt-to-total-asset value that complies with the restrictive covenants of the credit facility. The ratio of total-debt-to-total-market capitalization was 55.3% as of December 31, 2006. As used herein, “total market capitalization” means the sum of the outstanding amount of all indebtedness, the total liquidation preference of all preferred shares and the total market value of the outstanding Common Shares and the units of operating partnership interest in GPLP (“OP Units”) (based on the closing price of the Common Shares on December 31, 2006). PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 9 Our financial condition and distributions could be adversely affected by financial covenants. PRESIDENT’S LETTER Our mortgage indebtedness and credit facility impose certain financial and operating restrictions on our properties and restrictions on secured subordinated financing and financings on properties. These restrictions include restrictions on borrowings, prepayments and distributions. Additionally, our credit facility requires certain financial tests to be met and some of our mortgage indebtedness provides for prepayment penalties, each of which could restrict financial flexibility. Our variable rate debt obligations may impede our operating performance and put us at a competitive disadvantage, as well as adversely affect our ability to pay distributions to you. Required repayments of debt and related interest can adversely affect our operating performance. As of December 31, 2006, approximately $227.0 million of our indebtedness bears interest at a variable rate. Accordingly, an increase in interest rates on our existing indebtedness would increase interest expense, which could adversely affect our cash flow and ability to pay distributions. For example, if market rates of interest on our variable rate debt outstanding as of December 31, 2006, increased by 100 basis points, the increase in interest expense on our existing variable rate debt would decrease future earnings and cash flows by approximately $2.3 million annually. An increase in interest rates or total-debt-to-total-market capitalization could cause a decrease in the market price of the outstanding Common Shares. We believe that investors generally perceive REITs as yield-driven investments and compare the annual yield from distributions by REITs with yields on various other types of financial instruments. Thus, an increase in market interest rates generally could adversely affect the market price of Common Shares. Additionally, investors may react negatively to an increase in total-debt-to-total-market capitalization. The Board of Trustees has unlimited authority to increase the amount of debt that we may incur. The Board of Trustees (the “Board”) determines financing objectives and the amount of the indebtedness that we may incur and may make revisions to these objectives at any time without a vote of our shareholders. Although the Board has no present intention to change these objectives, revisions could result in a more highly leveraged company with an increased risk of default on indebtedness and an increase in debt service charges. Our issuance of additional Common Shares may affect prevailing market prices for the outstanding Common Shares. Future sales or the anticipation of such sales of additional Common Shares may have an adverse effect on the market price of our Common Shares. Our ability to operate or dispose of any partially-owned properties that we may acquire may be restricted. Our ownership of properties through partnership or joint venture investments may involve risks not otherwise present for wholly-owned properties. These risks include the possibility that our partners or co-venturers might become bankrupt, might have economic or other business interests or goals which are inconsistent with our business interests or goals and may be in a position to take action contrary to our instructions or make requests contrary to our policies or objectives, including our policy to maintain our qualification as a REIT. We may need the consent of our partners for major decisions affecting properties that are partially-owned. Joint venture agreements may also contain provisions that could force us to sell all of our interest in, or buy all of our partners’ interests in, such entity or property. These provisions may be triggered at a time when it is not advantageous for us to either buy our partners’ interests or sell our interest. Additionally, if we serve as the managing member of a property-owning joint venture, we may have certain fiduciary responsibilities to the other participants in such entity. There is no limitation under our organizational documents as to the amount of funds that may be invested in partnerships or joint ventures; however, covenants of our unsecured credit facility limit the amount of capital that we may invest in joint ventures at any one time. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 10 We are subject to certain conflicts of interest and limitations on property sales. PRESIDENT’S LETTER Pursuant to GPLP’s limited partnership agreement, GPLP may not sell all or substantially all of its assets without the consent of the holders of a majority of the OP Units, excluding GRT, if limited partners (other than GRT) at the time of the sale own in the aggregate ten percent or greater of the outstanding OP Units. At the present time, GRT owns 91.9% of the outstanding OP Units, resulting in the consent not being required. However, should limited partners (excluding GRT) own 10% or greater of the outstanding OP Units in the future, the majority vote requirement would effectively mean that Herbert Glimcher, the Chairman of the Board, and his sons, David Glimcher and Michael Glimcher, the President, Chief Executive Officer and a Trustee of GRT, must approve any such transaction because, together with their spouses, they own approximately 4.9% of the OP Units (which constitutes a majority of the OP Units other than those owned by GRT) outstanding as of December 31, 2006. As a result of Herbert Glimcher’s, David Glimcher’s and Michael Glimcher’s status as holders of both Common Shares and OP Units, they have interests that conflict with GRT shareholders with respect to business decisions affecting GRT and GPLP. In particular, as holders of OP Units, they may suffer different and/or more adverse tax consequences than GRT upon the sale or refinancing of some of our properties due to unrealized gains attributable to these properties. Therefore, GRT may have objectives different from Herbert Glimcher, David Glimcher and Michael Glimcher regarding the appropriate pricing and timing of any sale or refinancing of certain of our properties. Although GRT (through a wholly owned subsidiary), as the sole general partner of GPLP, has the exclusive authority as to whether and on what terms to sell, refinance, or seek to purchase an interest in an individual property, Herbert Glimcher, David Glimcher and Michael Glimcher might seek to influence decisions with respect to these actions, even though those actions might otherwise be financially advantageous or adverse to GRT. They also may seek to influence management to refinance one or more of our properties with a higher level of debt than would be in GRT’s best interests. Our charter and bylaws and the laws of the state of our incorporation contain provisions that may delay, defer or prevent a change in control or other transactions that could provide shareholders with the opportunity to realize a premium over the then-prevailing market price for our Common Shares. In order to maintain GRT’s qualification as a REIT for federal income tax purposes, not more than 50% in value of the outstanding Common Shares may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of the taxable year. Additionally, 100 or more persons must beneficially own the outstanding Common Shares during the last 335 days of a taxable year of 12 months or during a proportionate part of a shorter tax year. To ensure that GRT will not fail to qualify as a REIT under this test, GRT’s organizational documents authorize the Board to take such action as may be required to preserve GRT’s qualification as a REIT and to limit any person, other than Herbert Glimcher, David Glimcher (only with respect to the limitation on the ownership of outstanding Common Shares) and any entities or persons approved by the Board, to direct or indirect ownership exceeding (i) 8.0% of the lesser of the number or value of the outstanding Common Shares, (ii) 9.9% of the lesser of the number or value of the total 8¾% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest (“Series F Preferred Shares”) outstanding and (iii) 9.9% of the lesser of the number or value of the total 8⅛% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest (“Series G Preferred Shares”) outstanding. Herbert Glimcher and David Glimcher are limited to an aggregate of 25% direct or indirect ownership of Common Shares outstanding without approval of the Board. The Board has also granted an exemption to Cohen & Steers Capital Management, Inc., permitting them to own, directly or indirectly, of record or beneficially (i) up to 600,000 Series F Preferred Shares and (ii) up to 14.9% of the lesser of the number or value of the outstanding shares of any other class of the GRT’s equity securities. The Board has also granted an exemption to Neuberger Berman permitting them to own 608,800 Series G Preferred Shares. However, in no event, shall they be permitted to own, directly or indirectly, of record or beneficially, more than 14.9% of the lesser of the number or value of all outstanding shares of GRT’s equity securities. Despite these provisions, GRT cannot be sure that there will not be five or fewer individuals who will own more than 50% in value of its outstanding Common Shares, thereby causing GRT to fail to qualify as a REIT. The ownership limits may also discourage a change of control in GRT. The members of the Board are currently divided into three equal classes whose terms expire in 2007, 2008 and 2009, respectively. Each year one class of trustees is elected by GRT’s shareholders to hold office for three years. The staggered terms for Board members may affect the ability of GRT shareholders to change control of GRT even if a change in control were in the interests of the shareholders. PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 11 PRESIDENT’S LETTER GRT’s Amended and Restated Declaration of Trust, as amended (the “Declaration of Trust”) authorizes the Board to establish one or more series of preferred shares, in addition to those currently outstanding, and to determine the preferences, rights and other terms of any series. The Board could authorize GRT to issue other series of preferred shares that could deter or impede a merger, tender offer or other transaction that some, or a majority, of GRT shareholders might believe to be in their best interest or in which GRT shareholders might receive a premium for their shares over the then current market price of such shares. On March 9, 1999, GRT adopted a shareholder rights plan. Under the terms of the rights plan, the Board can in effect prevent a person or group from acquiring more than 15% of the outstanding Common Shares. Unless the Board approves of such person’s purchase, after that person acquires more than 15% of the outstanding Common Shares, all other shareholders will have the right to purchase Common Shares from GRT at a price that is half of their then fair market value. These purchases by the other shareholders would substantially reduce the value and influence of the Common Shares owned by the acquiring person. The Board, however, can prevent the rights plan from operating in this manner. This gives the Board significant discretion to approve or disapprove of a person’s efforts to acquire a large interest in GRT and, accordingly, may discourage a change in control of GRT. The Declaration of Trust and Amended and Restated Bylaws also contain other provisions that may delay or prevent a transaction or a change in control that might involve a premium price for the Common Shares or otherwise be in the best interests of GRT’s shareholders. As a Maryland REIT, GRT is subject to the provisions of the Maryland REIT law which imposes restrictions on some business combinations and requires compliance with statutory procedures before some mergers and acquisitions can occur, thus delaying or preventing offers to acquire GRT or increasing the difficulty of completing an acquisition of GRT, even if the acquisition is in the best interests of GRT’s shareholders. Risks associated with information systems may interfere with our operations. We are continuing to implement new information systems and problems with the design or implementation of these new systems could interfere with our operations. Our operations could be affected if we lose any key management personnel. FORM 10-K PROXY STATEMENT Our executive officers have substantial experience in owning, operating, managing, acquiring and developing shopping centers. Success depends in large part upon the efforts of these executives, and we cannot guarantee that they will remain with us. The loss of key management personnel in leasing, finance, legal and operations could have a negative impact on our operations. In addition, except for isolated examples, there are generally no restrictions on the ability of these executives to compete with us after termination of their employment. Inflation may influence our operations. Inflation risks could impact our operations due to increases in construction costs as well as other costs pertinent to our business, including, but not limited to, the cost of insurance and utilities. Item 1B. Unresolved Staff Comments CORPORATE INFORMATION The Company has received no written comments regarding its periodic or current reports from the staff of the SEC that were issued 180 days or more preceding the end of its 2006 fiscal year and that remain unresolved. Item 2. Properties The Company’s headquarters are located at 150 East Gay Street, Columbus, Ohio 43215, and its telephone number is (614) 621-9000. In addition, the Company maintains management offices at each of its Malls. At December 31, 2006, the Company managed and leased a total of 30 Properties of which the Company had an ownership interest (28 wholly-owned and 2 partially owned through a joint venture). The Properties are located in 16 states as follows: Ohio (10), West Virginia (3), California (2), Florida (2), Texas (2), Alabama (1), Kansas (1), Kentucky (1), Minnesota (1), New Jersey (1), North Carolina (1), Oklahoma (1), Oregon (1), Pennsylvania (1), Tennessee (1) and Washington (1). 12 (a) Malls PRESIDENT’S LETTER Twenty-six of the Properties are Malls and range in size from 442,000 square feet of GLA to 1.6 million square feet of GLA. Seven of the Malls are located in Ohio and 19 are located throughout the country in the states of California (2), Florida (2), Texas (2), West Virginia (2), Alabama (1), Kansas (1), Kentucky (1), Minnesota (1), New Jersey (1), North Carolina (1), Oklahoma (1), Oregon (1), Pennsylvania (1), Tennessee (1) and Washington (1). The location, general character and major tenant information are set forth below. Summary of Malls at December 31, 2006 Anchors GLA Stores GLA (1) Total GLA % of Anchors Occupied % of Stores Occupied Store Sales Per Square Ft.(2) Lease Expiration (3) Property/Location Anchors Almeda Mall, Houston, TX (10)…… PROXY STATEMENT 586,042 193,870 779,912 100.0 98.7 $281 JCPenney (8) Macy’s Palais Royal Ross Dress for Less Steve & Barry’s (4) (4) 12/31/09 01/31/12 01/31/13 Ashland Town Center Ashland, KY………... 263,794 177,966 441,760 58.1 94.6 $371 Belk Goody’s JCPenney 01/31/10 03/31/09 10/31/09 Colonial Park Mall Harrisburg, PA……… 504,446 239,034 743,480 100.0 98.3 $308 The Bon-Ton Boscov’s Sears 01/31/15 (4) (4) FORM 10-K Dayton Mall, The Dayton, OH…………. 935,130 422,720 1,357,850 100.0 93.8 $341 Mu Borders Books & Music DSW Shoe Warehouse Elder-Beerman JCPenney Linens’N Things Macy’s Old Navy Sears 12/31/21 07/31/10 (4) 03/31/11 01/31/17 (4) 07/31/10 (4) Eastland Mall (“Eastland North Carolina”) Charlotte, NC (10)….. 725,720 335,770 1,061,490 96.4 84.4 $209 Belk Burlington Coat Factory Dillard’s Eastland-Fields LLC Sears JC (4) (7) (4) (7) (4) CORPORATE INFORMATION Eastland Mall (“Eastland Ohio”) Columbus, OH……… 726,534 290,667 1,017,201 100.0 83.2 $277 JCPenney (5) Kaufmann’s Macy’s (8) Sears 01/31/13 (4) (4) (4) 13 PRESIDENT’S LETTER Property/Location Anchors GLA Stores GLA (1) Total GLA % of Anchors Occupied % of Stores Occupied Store Sales Per Square Ft.(2) Anchors Lease Expiration (3) Grand Central Mall Parkersburg, WV…… 562,394 367,580 929,974 100.0 92.8 $313 Belk Elder-Beerman (5) Goody’s JCPenney Regal Cinemas Sears Steve & Barry’s 03/31/18 01/31/33 04/30/06 09/30/07 01/31/17 09/25/12 01/31/11 Great Mall of the Great Plains, The Olathe, KS………….. 397,947 385,063 783,010 75.8 85.6 $170 PROXY STATEMENT Burlington Coat Factory Dickinson Theatres Foozles Group USA Steve & Barry’s VF Factory Outlet Zonkers 01/31/08 09/30/08 01/31/09 08/13/07 01/31/13 01/10/08 04/30/09 Indian Mound Mall Heath, OH…………... 389,589 167,890 557,479 100.0 90.7 $247 Crown Cinema Elder-Beerman Goody’s JCPenney Sears (5) Steve & Barry’s Bed Bath & Beyond Burlington Coat Factory Cohoes Fashions Daffy’s DSW Shoe Warehouse/ Filene’s Basement Gap Outlet, The Group USA Jeepers! Last Call Loew’s Theaters Marshalls Modell’s Sporting Goods Nike Factory Store Off 5th Saks Fifth Ave Outlet Old Navy Barnes & Noble Lloyd Center Ice Rink(6) Lloyd Mall Cinemas Macy’s Marshalls Nordstrom Ross Dress for Less Sears 12/31/12 01/31/09 05/31/08 10/31/11 09/23/27 01/31/11 01/31/10 01/31/10 01/31/10 01/31/10 Jersey Gardens Elizabeth, NJ………... 648,980 641,931 1,290,911 100.0 99.3 $502 FORM 10-K 10/31/11 01/31/10 12/31/08 01/31/10 11/30/09 12/31/20 10/31/09 01/31/17 11/30/11 10/31/14 05/31/10 01/31/12 12/31/08 01/31/12 01/31/11 01/31/09 (4) 01/31/15 (4) CORPORATE INFORMATION Lloyd Center Portland, OR………... 738,444 733,833 1,472,277 93.8 96.8 $395 14 Property/Location Anchors GLA Stores GLA (1) Total GLA % of Anchors Occupied % of Stores Occupied Store Sales Per Square Ft.(2) Anchors Lease Expiration (3) PRESIDENT’S LETTER Mall at Fairfield Commons, The Beavercreek, OH…… 768,284 375,628 1,143,912 100.0 98.7 $367 Dick’s Sporting Good’s Elder-Beerman JCPenney Macy’s (5) Parisian Sears 01/31/21 01/31/15 10/31/08 01/31/15 01/31/14 10/31/08 Mall at Johnson City, The Johnson City, TN…… 358,395 174,064 532,459 93.4 94.8 $417 Belk for Her Belk Home Store Goody’s JCPenney Sears 10/31/12 06/30/11 05/31/11 03/31/10 (5) PROXY STATEMENT Montgomery Mall Montgomery, AL(10) 460,341 266,552 726,893 61.7 39.1 $232 Parisian (8) Steve & Barry’s (4) 01/31/13 Morgantown Mall Morgantown, WV…... 396,358 161,374 557,732 100.0 92.2 $310 Belk Carmike Cinemas Elder-Beerman JCPenney Sears Steve & Barry’s 03/15/11 10/31/24 01/29/11 09/30/10 09/30/10 01/31/13 FORM 10-K New Towne Mall New Philadelphia, OH. 361,501 155,095 516,596 100.0 94.8 $247 Elder-Beerman Goody’s JCPenney Kohl’s Regal Cinemas Sears Super Fitness Center Best Buy Burlington Coat Factory Steve & Barry’s Academy of Healthcare Professionals All Shoes $9.99 Macy’s Palais Royal 02/02/09 08/31/14 09/30/08 01/31/27 03/31/07 10/31/08 02/28/14 01/31/10 09/30/10 01/31/11 Northtown Mall Blaine, MN…………. 316,015 294,024 610,039 58.6 86.0 $344 Northwest Mall Houston, TX (10)……. 584,016 211,662 795,678 64.2 80.3 $301 10/31/16 06/30/08 (4) 12/31/09 CORPORATE INFORMATION Polaris Fashion Place Columbus, OH………. 1,088,075 518,807 1,606,882 100.0 98.3 $399 Great Indoors, The JCPenney Kaufmann’s (8) Macy’s Saks Fifth Avenue Sears Von Maur (4) (4) (4) (4) (4) (4) (4) 15 PRESIDENT’S LETTER Property/Location Anchors GLA Stores GLA (1) Total GLA % of Anchors Occupied % of Stores Occupied Store Sales Per Square Ft.(2) Anchors Lease Expiration (3) River Valley Mall Lancaster, OH………. 316,947 260,520 577,467 100.0 92.8 $298 Elder-Beerman JCPenney Macy’s Regal Cinemas Sears Steve & Barry’s 02/02/08 09/30/12 09/30/07 12/31/06 10/31/09 01/31/11 SuperMall of the Great Northwest Auburn, WA………... 541,669 400,855 942,524 100.0 93.4 $262 Bed Bath & Beyond Burlington Coat Factory Gart Sports Marshalls Nordstrom Old Navy Sam’s Club Steve & Barry’s Vision Quest Burlington Coat Factory Cobb Theater (6) Dillard’s Macy’s Sears Steve & Barry’s Barnes & Noble Dillard’s JCPenney Sears AMC Theatres JCPenney Macy’s Old Navy Saks Fifth Avenue Sears 01/31/07 01/31/11 01/31/11 01/31/11 08/31/10 01/31/11 05/31/19 01/31/14 11/30/18 PROXY STATEMENT University Mall Tampa, FL (10)……... 807,677 428,842 1,236,519 97.5 92.7 $315 (4) 12/31/11 (4) (4) (4) 01/31/13 01/31/09 (4) 03/31/09 (4) 01/31/21 09/30/12 (4) 01/31/11 11/30/18 09/30/17 Weberstown Mall Stockton, CA………. FORM 10-K 602,817 256,506 859,323 100.0 96.3 $411 WestShore Plaza Tampa, FL…………. 769,878 289,647 1,059,525 100.0 99.0 $512 Subtotal…………….. 13,850,993 7,749,900 21,600,893 93.9% 91.7% $348 CORPORATE INFORMATION Malls owned in a joint venture Puente Hills Mall (9) City of Industry, CA.. 731,289 452,183 1,183,472 96.4 93.8 $271 AMC 20 Theaters Burlington Coat Factory Circuit City Comp USA (8) Linen’s N Things Macy’s Ross Dress for Less Sears Spectrum Club 04/30/17 10/31/08 01/31/19 10/31/17 01/31/14 (4) 01/31/10 (4) 01/31/14 16 Property/Location Tulsa Promenade (9) Tulsa, OK…………... Anchors GLA Stores GLA (1) Total GLA % of Anchors Occupied % of Stores Occupied Store Sales Per Square Ft.(2) $307 Anchors Lease Expiration (3) 12/31/16 01/31/19 03/31/11 03/31/11 (11) PRESIDENT’S LETTER 690,235 234,497 924,732 100.0 80.2 Dillard’s Hollywood Theaters JCPenney Macy’s MDS Realty II, LLC (8) Subtotal……………… 1,421,524 686,680 2,108,204 98.2% 94.3% 89.1% 91.5% $288 $344 Total………………….. 15,272,517 (1) (2) (3) (4) (5) (6) (7) (8) (9) 8,436,580 23,709,097 Includes outparcels. Average 2006 store sales per square foot for in-line stores of less than 20,000 square feet. Lease expiration dates do not contemplate or include options to renew. The tenant owns the land and the building and operates under an operating agreement. This is a ground lease by the Company to the tenant. The Company owns the land and not the building. Managed by Ohio Entertainment Corporation, a wholly owned subsidiary of Glimcher Development Corporation. Building owned by third party, space partially occupied at year-end. Tenant vacated the store, but continues to pay through the expiration date. The Operating Partnership has an investment in this Mall of 52%. The Company is responsible for management and leasing services and receives fees for providing these services. (10) Property was classified as held-for-sale as of December 31, 2006. (11) The tenant owns the land and the building and is subjected to the Mervyn’s operating agreement. PROXY STATEMENT (b) Community Centers Four of the Properties are Community Centers ranging in size from approximately 149,000 to 443,000 square feet of GLA. They are located in 2 states as follows: Ohio (3), and West Virginia (1). The location, general character and major tenant information are set forth below. FORM 10-K Summary of Community Centers at December 31, 2006 Anchors GLA 173,009 Property/Location Knox Village Square Mount Vernon, OH ...................... Morgantown Commons Morgantown, WV ........................ Stores GLA (1) 34,400 Total GLA 207,409 % of Anchors Occupied 67.8 % of Stores Occupied 81.1 Anchors JCPenney Kmart Gabriel Brothers Kmart Lease Expiration (2) 05/31/08 11/30/17 01/31/17 02/28/21 200,187 30,656 230,843 100.0 20.7 Ohio River Plaza Gallipolis, OH .............................. 106,242 43,136 149,378 15.4 87.9 Peebles 01/31/17 CORPORATE INFORMATION Polaris Towne Center Columbus, OH ............................. 291,997 151,040 443,037 100.0 98.5 Barnes & Noble Best Buy Jo-Ann etc. Kroger Linens ‘N Things OfficeMax Old Navy T.J. Maxx 01/31/15 01/31/15 01/31/10 11/30/18 01/31/15 09/30/14 01/31/10 03/31/09 Total .............................................. 771,435 259,232 1,030,667 81.1% 85.2% (1) (2) Includes outparcels. Lease expiration dates do not contemplate options to renew. 17 (c) PRESIDENT’S LETTER Properties Subject to Indebtedness At December 31, 2006, 25 of the Properties, consisting of 22 Malls (20 wholly-owned and 2 partially owned through a joint venture) and 3 Community Centers, were encumbered by mortgages and 4 Malls and 1 Community Center were unencumbered. The 5 unencumbered Properties had a net book value of $239.4 million at December 31, 2006. To facilitate the funding of working capital requirements and to finance the acquisition and development of the Properties, the Company has entered into an unsecured revolving line of credit with several financial institutions. Various Mortgage Loans The following table sets forth certain information regarding the mortgages which encumber various Properties. All of the mortgages are first mortgage liens on the Properties. The information is as of December 31, 2006 (dollars in thousands). PROXY STATEMENT Encumbered Property $36.4 million SAN Mall note Almeda Mall Northwest Mall $58.4 million Morgantown note Morgantown Mall Morgantown Commons Colonial Park Mall Knox Village Square Eastland North Carolina Great Mall of the Great Plains, The Grand Central Mall Mall at Johnson City, The Polaris Towne Center Ashland Town Center Dayton Mall, The WestShore Plaza Polaris Fashion Place Lloyd Center Jersey Gardens Mall at Fairfield Commons, The SuperMall of the Great Northwest River Valley Mall Weberstown Mall Eastland Ohio Total fixed rate notes: Montgomery Mall Total variable rate notes: Fixed/ Variable Interest Rate Fixed Interest Rate 8.35% Loan Balance $ 33,020 Annual Debt Payment at Service (1) Maturity $ 3,320 $ 32,615 Maturity 10/11/2007 (2) Fixed 6.89% 52,474 $ 4,608 $ 50,823 09/11/2008 (2) Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed Fixed 7.73% 7.41% 7.84% 6.35% 7.18% 8.37% 8.20% 7.25% 8.27% 5.09% 5.24% 5.42% 4.83% 5.45% 7.54% 5.65% 5.90% 5.87% 32,451 8,753 43,766 30,000 47,815 38,787 40,482 24,809 55,886 95,255 142,129 133,256 158,791 109,232 59,515 50,000 60,000 43,000 1,259,421 $ 3,088 $ 772 $ 4,308 $ 1,932 $ 4,268 $ 3,740 $ 3,858 $ 2,344 $ 5,556 $ 6,508 $ 9,928 $ 9,456 $10,424 $ 7,724 $ 5,412 $ 2,864 $ 3,590 $ 2,557 $ 32,033 $ 8,624 $ 42,302 $ 30,000 $ 46,065 $ 37,026 $ 38,543 $ 21,817 $ 49,864 $ 84,824 $124,572 $116,922 $135,194 $ 92,762 $ 49,969 $ 44,931 $ 60,000 $ 38,057 10/11/2007 (2) 02/11/2008 09/11/2008 (2) 01/12/2009 02/01/2009 06/01/2010 06/01/2010 (2) 11/01/2011 07/11/2012 (2) 09/09/2012 04/11/2013 06/11/2013 (2) 06/08/2014 11/01/2014 02/11/2015 (2) 01/11/2016 06/08/2016 12/11/2016 FORM 10-K Variable 7.03% 25,000 25,000 $1,284,421 (3) $ 1,781 $ 25,000 01/31/2007 CORPORATE INFORMATION Total Wholly Owned Properties: Joint Venture Properties: Puente Hills Mall (4) Tulsa Promenade (5) Total Joint Venture Properties: Fixed Fixed 5.20% 6.52% $ 45,436 18,200 $ 3,151 $ 1,203 $ 44,324 $ 18,200 06/01/2008 03/14/2009 $ 63,636 (1) Annual debt service for variable rate notes is calculated based on the interest rate at December 31, 2006. (2) Optional prepayment date (without penalty) is shown. Loan matures at a later date. (3) This total differs from the amounts reported in the financial statements due to $19.0 million in tax exempt borrowings which are not secured by a mortgage and fair value adjustments to debt instruments as required by SFAS No. 141, “Business Combinations.” (4) The Company acquired a 52% interest in this Property on December 29, 2005. (5) On March 14, 2006, the Company divested of its 100% interest in this Property and transferred it to a joint venture in which it has a 52% interest. 18 Item 3. Legal Proceedings PRESIDENT’S LETTER The Company is involved in lawsuits, claims and proceedings, which arise in the ordinary course of business. The Company is not presently involved in any material litigation. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies,” the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders through the solicitation of proxies or otherwise during the fourth quarter of fiscal year 2006. PART II. Item 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities (a) Market Information PROXY STATEMENT The Common Shares are currently listed and traded on the New York Stock Exchange (“NYSE”) under the symbol “GRT.” On February 22, 2007, the last reported sales price of the Common Shares on the NYSE was $29.21. The following table shows the high and low sales prices for the Common Shares on the NYSE for the 2006 and 2005 quarterly periods indicated as reported by the New York Stock Exchange Composite Tape and the cash distributions per Common Share paid by GRT with respect to such period. Quarter Ended March 31, 2005 June 30, 2005 September 30, 2005 December 31, 2005 March 31, 2006 June 30, 2006 September 30, 2006 December 31, 2006 (b) Holders High $28.03 $29.00 $30.16 $26.70 $29.10 $28.36 $25.63 $27.72 Low $23.40 $23.45 $24.03 $21.74 $23.95 $23.88 $23.08 $24.20 Distributions Per Share $0.4808 $0.4808 $0.4808 $0.4808 $0.4808 $0.4808 $0.4808 $0.4808 FORM 10-K The number of holders of record of the Common Shares was 911 as of February 22, 2007. (c) Distributions Future distributions paid by GRT on the Common Shares will be at the discretion of the trustees of GRT and will depend upon the actual cash flow of GRT, its financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and such other factors as the trustees of GRT deem relevant. GRT has implemented a Distribution Reinvestment and Share Purchase Plan (the “Plan”) under which its shareholders or OP Unit holders may elect to purchase additional Common Shares at fair value and/or automatically reinvest their distributions in Common Shares at fair value. In order to fulfill its obligations under the Plan, GRT may purchase Common Shares in the open market or issue Common Shares that have been registered and authorized specifically for the Plan. As of December 31, 2006, 2,100,000 Common Shares were authorized, of which 268,052 Common Shares have been issued under the Plan. Item 6. Selected Financial Data The following table sets forth Selected Financial Data for the Company. This information should be read in conjunction with the consolidated financial statements of the Company and Management’s Discussion and Analysis of the Financial Condition and Results of Operations, each included elsewhere in this Form 10-K. 19 CORPORATE INFORMATION PRESIDENT’S LETTER SELECTED FINANCIAL DATA For the Years Ended December 31, 2006 Operating Data (in thousands, except per share amounts): (1) Total revenues………………………………………………. Operating income……………………………………………. Interest expense……………………………………………… Gain on sales of properties, net……….……………………… (Loss) income from continuing operations………………….. (Loss) income from continuing operations per share common (diluted)…………………………………………………… Net (loss) income……………………………………….….. Preferred stock dividends……………………………………. Net (loss) income available to common shareholders……….. Per common share data: Earnings per share (diluted)……….. Distributions (per common share)…………………………… Balance Sheet Data (in thousands): Investment in real estate, net…………………………………. Total assets………………………………………………….. Total long-term debt…………………………………………. Total shareholders’ equity…………………………………… Other Data: Cash provided by operating activities (in thousands)……….. Cash (used in) provided by investing activities (in thousands)………………………………………………… Cash provided by (used in) financing activities (in thousands)………………………………………………… Funds from operations (2) (in thousands)…………………… Number of properties (3) (4)………………………………... Total GLA (in thousands) (3) (4)…………………………… Occupancy rate % (3) ………………………………………. 2005 2004 2003 2002 $ 309,264 $ 63,742 $ 84,985 $ 1,717 $ (11,602) $ $ $ $ $ $ (0.93) (77,165) 17,437 (94,602) (2.58) 1.9232 $ 300,026 $ 105,994 $ 74,396 $ 1,619 $ 31,666 $ $ $ $ $ $ 0.36 20,850 17,437 3,413 0.09 1.9232 $ 288,839 $ 103,563 $ 78,359 $ 19,646 $ 22,488 $ $ $ $ $ $ 0.08 51,755 17,517 29,360 0.82 1.9232 $ 244,327 $ 85,534 $ 68,824 $ 703 $ 18,982 $ $ $ $ $ $ 0.18 32,961 13,688 19,273 0.55 1.9232 $ 204,973 $ 68,831 $ 85,773 $ 15,756 $ (14,479) $ $ $ $ $ $ (0.68) 33,604 11,833 21,771 0.67 1.9232 PROXY STATEMENT $1,773,805 $1,888,820 $1,576,886 $ 225,235 $1,877,059 $1,995,312 $1,501,481 $ 387,054 $1,835,298 $1,947,024 $1,402,604 $ 443,822 $1,724,226 $1,837,423 $1,295,058 $ 441,939 $1,507,277 $1,622,433 $1,095,930 $ 416,492 $ 96,230 $ 108,345 $ (120,203) $ $ 11,233 77,666 36 24,615 91.9% $ $ 102,305 38,133 $ 98,894 $ 67,600 $ (108,911) $ $ 16,611 (25,502) 30 24,740 92.8% $ (200,229) $ 101,066 $ 88,897 70 27,061 89.8% $ 175,697 $ (240,697) $ 74,828 73 25,716 88.9% FORM 10-K $ (143,032) $ 89,629 41 24,291 89.3% (1) Operating data for the years ended December 31, 2005, 2004, 2003 and 2002 are restated to reflect the impact of SFAS No. 144. (2) FFO as defined by NAREIT is used by the real estate industry and investment community as a supplemental measure of the performance of real estate companies. NAREIT defines FFO as net income (loss) available to common shareholders (computed in accordance with GAAP), excluding gains or losses from sales of depreciable property, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. FFO does include impairment losses for properties held-for-use and held-for-sale. The Company’s FFO may not be directly comparable to similarly titled measures reported by other real estate investment trusts. FFO does not represent cash flow from operating activities in accordance with GAAP and should not be considered as an alternative to net income (determined in accordance with GAAP), as an indication of the Company’s financial performance or to cash flow from operating activities (determined in accordance with GAAP), as a measure of the Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make cash distributions. A reconciliation of FFO to net income available to common shareholders is provided in Item 7 of this Form 10-K. (3) Number of Properties and GLA include Properties which are both wholly owned by the Company or by a joint venture in which the Company has a joint venture interest. Occupancy of the Properties is defined as any space where a store is open or a tenant is paying rent at the date indicated, excluding all tenants with leases having an initial term of less than one year. (4) The number of Properties owned by joint ventures in which the Company has an interest and the GLA of those Properties included in the table are as follows: 2006 includes 2.1 million square feet of GLA (2 Properties), 2005 includes 1.2 million square feet of GLA (1 Property), none in 2004, 2003 includes 2.0 million square feet of GLA (2 Properties) and 2002 includes 3.8 million square feet of GLA (4 Properties). CORPORATE INFORMATION 20 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations PRESIDENT’S LETTER Overview GRT is a self-administered and self-managed Maryland real estate investment trust, or REIT, which commenced business operations in January 1994 at the time of its initial public offering. We own, lease, manage and develop a portfolio of retail properties consisting of regional and super regional malls and community shopping centers. As of December 31, 2006, we owned interests in and managed 30 Properties, consisting of 26 Malls (24 wholly-owned and 2 partially owned through a joint venture) and 4 Community Centers located in 16 states. The Properties contain an aggregate of approximately 24.7 million square feet of GLA of which approximately 92.8% was occupied at December 31, 2006. Our primary business objective is to achieve growth in net income and funds from operations, or FFO, by developing and acquiring retail properties; by improving the operating performance and value of our existing portfolio through selective expansion and renovation of our Properties; and by maintaining high occupancy rates, increasing minimum rents per square-foot of GLA and aggressively controlling costs. PROXY STATEMENT Key elements of our growth strategies and operating policies are to: • • • Increase Property values by aggressively marketing available GLA and renewing existing leases; Negotiate and sign leases which provide for regular or fixed contractual increases to minimum rents; Capitalize on management’s long-standing relationships with national and regional retailers and extensive experience in marketing to local retailers, as well as exploit the leverage inherent in a larger portfolio of properties in order to lease available space; Utilize our team-oriented management approach to increase productivity and efficiency; Acquire strategically located malls; Hold Properties for long-term investment and emphasize regular maintenance, periodic renovation and capital improvements to preserve and maximize value; Selectively dispose of assets we believe have achieved long-term investment potential and redeploy the proceeds; Control operating costs by utilizing our employees to perform management, leasing, marketing, finance, accounting, construction supervision, legal and information technology services; Renovate, reconfigure or expand Properties and utilize existing land available for expansion and development of outparcels to meet the needs of existing or new tenants; and Utilize our development capabilities to develop quality properties at low costs. • • • FORM 10-K • • • • Our strategy is to be a leading REIT focusing on anchored-retail properties located primarily in the top 100 metropolitan statistical areas by population. We expect to continue investing in select development opportunities and in strategic acquisitions of mall properties that provide growth potential. We expect to finance acquisition, redevelopment and development opportunities with cash on hand, borrowings under credit facilities, proceeds from strategic joint venture partners, asset dispositions, secured mortgage financings, the issuance of equity or debt securities, or a combination of two or more of the foregoing. Critical Accounting Policies and Estimates General Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and 21 CORPORATE INFORMATION PRESIDENT’S LETTER liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Audit Committee of the Board and the Company’s independent registered public accounting firm. Actual results may differ from these estimates under different assumptions or conditions. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made and if different estimates that are reasonably likely to occur could materially impact the financial statements. Management believes the critical accounting policies discussed in this section reflect its more significant estimates and assumptions used in preparation of the consolidated financial statements. Revenue Recognition The Company’s revenue recognition policy relating to minimum rents does not require the use of significant estimates. Percentage rents, tenant reimbursements and components of other revenue associated with the margins related to outparcel sales include estimates. Percentage Rents Percentage rents, which are based on tenants’ sales as reported to the Company, are recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants’ leases. The percentage rents are recognized based upon the measurement dates specified in the leases which indicate when the percentage rent is due. Tenant reimbursements Estimates are used to record cost reimbursements from tenants for CAM, real estate tax, utilities and insurance. We recognize revenue based upon the amounts to be reimbursed from our tenants in the same period these reimbursable expenses are incurred. Differences between estimated cost reimbursements and final amounts billed are recognized in the subsequent year. Leases are not uniform in dealing with such cost reimbursements and variations exist in computations between Properties and tenants. The Company analyzes the balance of its estimated accounts receivable for real estate taxes, CAM and insurance for each of its Properties by comparing actual reimbursements versus actual expenses. Adjustments are also made throughout the year to these receivables and the related cost reimbursement income based upon the Company’s best estimate of the final amounts to be billed and collected. If management’s estimate of the percent of recoverable expenses that can be billed to the tenants in 2006 differs from actual amounts billed in 2007 by 1%, the amount of income recorded during 2006 would increase or decrease by $1.0 million. Outparcel sales The Company sells outparcels at its various Properties. The estimated cost used to calculate the margin from these sales involves a number of estimates. The estimates made are based either upon assigning a proportionate cost, upon historical cost paid for the total parcel to the portion of the parcel that is sold, or by incorporating the sales value method. The proportionate share of actual cost is derived through consideration of numerous factors. These factors include items such as ease of access to the parcel, visibility from high traffic areas and other factors that may differentiate the desirability of the particular section of the parcel that is sold. Accounts Receivable and Allowance for Doubtful Accounts The allowance for doubtful accounts reflects the Company’s estimate of the amounts of the recorded accounts receivable at the balance sheet date that will not be recovered from cash receipts in subsequent periods. The Company’s policy is to record a periodic provision for doubtful accounts based on total revenues. The Company also periodically reviews specific tenant balances and determines whether an additional allowance is necessary. In recording such a provision, the Company considers a tenant’s creditworthiness, ability to pay, probability of collection and consideration of the retail sector in which the tenant operates. The allowance for doubtful accounts is reviewed periodically based upon the Company’s historical experience. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 22 Investment in Real Estate PRESIDENT’S LETTER Carrying Value of Assets The Company maintains a diverse portfolio of real estate assets. The portfolio holdings have increased as a result of both acquisitions and the development of new Properties and have been reduced by selected sales of assets. The amounts to be capitalized as a result of acquisition and developments and the periods over which the assets are depreciated or amortized are determined based on the application of accounting standards that may require estimates as to fair value and the allocation of various costs to the individual assets. The Company allocates the cost of the acquisition based upon the estimated fair value of the net assets acquired. The Company also estimates the fair value of intangibles related to its acquisitions. The valuation of the fair value of the intangibles involves estimates related to market conditions, probability of lease renewals and the current market value of in-place leases. This market value is determined by considering factors such as the tenant’s industry, location within the Property and competition in the specific market in which the Property operates. Differences in the amount attributed to the intangible assets can be significant based upon the assumptions made in calculating these estimates. Impairment Evaluation Management evaluates the recoverability of its investment in real estate assets in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that recoverability of the asset is not assured. The Company evaluates the recoverability of its investments in real estate assets to be held and used each quarter and records an impairment charge when there is an indicator of impairment and the undiscounted projected cash flows are less than the carrying amount for a particular Property. The estimated cash flows used for the impairment analysis and the determination of estimated fair value are based on the Company’s plans for the respective assets and the Company’s views of market and economic conditions. The estimates consider matters such as current and historical rental rates, occupancies for the respective Properties and comparable properties and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the Company’s plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, could be substantial. Investment in Real Estate – Held-for-Sale The Company evaluates the held-for-sale classification of its owned real estate each quarter. Assets that are classified as held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell. Assets are generally classified as held-for-sale once management commits to a plan to sell the Properties and has initiated an active program to market them for sale. The results of operations of these real estate properties are reflected as discontinued operations in all periods reported. On occasion, the Company will receive unsolicited offers from third parties to buy individual Properties. Under these circumstances, the Company will classify the particular Property as held-for-sale when a sales contract is executed with no contingencies and the prospective buyer has funds at risk to ensure performance. PROXY STATEMENT FORM 10-K CORPORATE INFORMATION Sale of Real Estate Assets The sale of real estate assets may also involve the application of judgments in determining whether the risks and rewards of ownership have transferred to the buyer and that a sale has been completed for purposes of recognizing a gain on the sale. The Company recognizes property sales in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” The Company generally records the sales of operating properties and outparcels using the full accrual method at closing, when the earnings process is deemed to be complete. Sales not qualifying for full recognition at the time of sale are accounted for under other appropriate deferral methods. Accounting for Acquisitions The fair value of the real estate acquired is allocated to acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases, the value of tenant relationships, and the value of in-place leases, 23 PRESIDENT’S LETTER based in each case on their fair values. Purchase accounting is applied to assets and liabilities related to real estate entities acquired based upon the percentage of interest acquired. The fair value of the tangible assets of an acquired property (which includes land, building and tenant improvements) is determined by valuing the property as if it were vacant, based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods to determine the replacement cost of the tangible assets. In determining the fair value of the identified intangible assets and liabilities of an acquired property, abovemarket and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding inplace leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized abovemarket lease values and the capitalized below-market lease values are amortized as an adjustment to rental income over the initial lease term. PROXY STATEMENT The aggregate value of in-place leases is determined by evaluating various factors, including an estimate of carrying costs during the expected lease-up periods, current market conditions and similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs. The value assigned to this intangible asset is amortized over the remaining lease term plus an assumed renewal period that is reasonably assured. The aggregate value of other acquired intangible assets include tenant relationships. Factors considered by management in assigning a value to these relationships include: assumptions of probability of lease renewals, investment in tenant improvements, leasing commissions and an approximate time lapse in rental income while a new tenant is located. The value assigned to this intangible asset is amortized over the average life of the relationship. Depreciation and Amortization FORM 10-K Depreciation expense for real estate assets is computed using a straight-line method and estimated useful lives for buildings and improvements using a weighted average composite life of forty years and equipment and fixtures of five to ten years. Expenditures for leasehold improvements and construction allowances paid to tenants are capitalized and amortized over the initial term of each lease. Cash allowances paid to retailers that are used for purposes other than improvements to the real estate are amortized as a reduction to minimum rents over the initial lease term. Maintenance and repairs are charged to expense as incurred. Cash allowances paid in return for operating covenants from retailers who own their real estate are capitalized as contract intangibles. These intangibles are amortized over the period the retailer is required to operate their store. Investment in Unconsolidated Real Estate Entities The Company evaluates all joint venture arrangements for consolidation. The percentage interest in the joint venture, evaluation of control and whether a variable interest entity (“VIE”) exists are all considered in determining if the arrangement qualifies for consolidation. CORPORATE INFORMATION The Company accounts for its investments in unconsolidated real estate entities using the equity method of accounting, whereby the cost of an investment is adjusted for the Company’s share of equity in net income or loss beginning on the date of acquisition and reduced by distributions received. The income or loss of each investee is allocated in accordance with the provisions of the applicable operating agreements. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences between the carrying amount of the Company’s investment in the respective investees and the Company’s share of the underlying equity of such unconsolidated entities are amortized over the respective lives of the underlying assets as applicable. The Company periodically reviews its investment in unconsolidated real estate entities for other than temporary declines in market value. Any decline that is not expected to be recovered in the next twelve months is considered other than temporary and an impairment charge is recorded as a reduction in the carrying value of the investment. No impairment charges were recognized during the year ended December 31, 2006 related to our investment in unconsolidated real estate entities. 24 Deferred Costs PRESIDENT’S LETTER The Company capitalizes initial direct costs in accordance with SFAS No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases,” and amortizes these costs over the initial lease term. The costs are capitalized upon the execution of the lease and the amortization period begins the earlier of the store opening date or the date the tenant’s lease obligation begins. Derivatives The Company has used interest rate cap agreements to hedge interest rate exposure and interest rate swap contracts to convert a portion of its variable rate debt to fixed rate debt. The Company has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors, and all contracts are intended to be effective as hedges of specific interest rate risk exposures. In connection with the determination of the effectiveness of these hedges and the recognition of any unrealized gain or loss on these contracts, the Company computes the fair value of the contracts at each balance sheet date. To determine the fair values of derivative instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. Standard market conventions and techniques such as discounted cash flow analysis, 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. The Company at times employs an external third party to perform an independent assessment of the fair value of the derivatives portfolio. The aggregate fair value of the Company’s derivative instruments was nominal at December 31, 2006 and 2005. Funds From Operations Our consolidated financial statements have been prepared in accordance with GAAP. We have also indicated that FFO is a key measure of financial performance. FFO is an important and widely used financial measure of operating performance in the REIT industry, which we believe provides important information to investors and a relevant basis for comparison among REITs. We believe that FFO is an appropriate and valuable measure of our operating performance because real estate generally appreciates over time or maintains a residual value to a much greater extent than personal property and, accordingly, reductions for real estate depreciation and amortization charges are not meaningful in evaluating the operating results of the Properties. FFO, as defined by NAREIT (defined fully in Item 1) is used by the real estate industry and investment community as a supplemental measure of the performance of real estate companies. FFO does not represent cash flow from operating activities in accordance with GAAP and should not be considered as an alternative to net income as the primary indicator of our operating performance or as an alternative to cash flow as a measure of liquidity. Our FFO may not be directly comparable to similarly titled measures reported by other REIT’s. The following table illustrates the calculation of FFO and the reconciliation of FFO to net income available to common shareholders for the years ended December 31, 2006, 2005 and 2004 (in thousands): For the Years Ended December 31, 2006 2005 2004 $ (94,602) $ 3,413 $29,360 73,926 (1,443) 6,067 (7,733) (1,717) $ (25,502) 75,620 (51) 51 252 (1,619) $77,666 76,970 (3) 42 2,906 (19,646) $89,629 PROXY STATEMENT FORM 10-K Net (loss) income available to common shareholders……………….. Add back (less): Real estate depreciation and amortization……………………….. Equity in income of unconsolidated entities…………………… Share of joint venture real estate depreciation and amortization.. Minority interest in Operating Partnership………………………. Discontinued operations: Gain on sales of properties…………… Funds from operations………………………………………………. CORPORATE INFORMATION FFO – Comparison of year ended December 31, 2006 to December 31, 2005 FFO decreased 132.8%, or $103.2 million, for the year ended December 31, 2006 compared to the year ended December 31, 2005. During 2006, we incurred $111.9 million of impairment charges primarily related to three Mall Properties, two of which were listed as held-for-sale, as compared to $16.4 million related primarily to Community Centers for the same period ended December 31, 2005. Also contributing to the decrease in FFO was a 25 PRESIDENT’S LETTER $18.0 million increase in overall interest expense. This increase in interest expense can be attributed to a $9.4 million defeasance charge associated with the release of a lien and security interest related to the mortgage loan on University Mall and release of the Company from our obligation under the loan. The increase in interest expense is also attributable to a higher average loan balance during 2006 as compared to 2005, primarily due to funding of acquisitions, capital improvements and the Company’s redevelopment program. Excluding the non-cash impairment charges and defeasance costs, FFO would have been $95.8 million for the year ended December 31, 2006 compared to $94.1 million for the year ended December 31, 2005. Offsetting these decreases to FFO was an increase of $6.0 million to our pro-rata share of FFO from our joint venture investment in Puente Hills Mall (“Puente”) and Tulsa Promenade (“Tulsa”). Also, our general and administrative costs decreased by $3.1 million. This decrease is primarily due to $3.3 million of charges in 2005 relating to an employment agreement ($2.0 million) and a severance agreement ($1.3 million) with two of the Company’s former executives. FFO – Comparison of year ended December 31, 2005 to December 31, 2004 PROXY STATEMENT FFO decreased 13.3%, or $12.0 million, for the year ended December 31, 2005 compared to the year ended December 31, 2004. During 2005, we incurred $16.4 million of impairment charges to FFO in connection with Community Centers that were either sold or held-for-sale. Also contributing to the decrease in FFO was a $7.6 million reduction in net operating income previously generated from sold Properties. Lastly, general and administrative costs increased by $4.1 million. This increase is related to charges associated with an employment agreement ($2.0 million) and a severance agreement ($1.3 million) with two of the Company’s former executives in 2005 and increased costs associated with corporate governance. Offsetting these decreases in FFO was lower overall interest expense of approximately $4.5 million, a $7.4 million greater contribution of operating income from our Properties in 2005 and no redemption costs as incurred in the previous year. The decrease in interest expense was driven primarily by lower outstanding borrowings for the year ended December 31, 2005 as compared to the year ended December 31, 2004. We also incurred a $4.9 million charge associated with the original issuance costs of the 9.25% Series B Cumulative Preferred Shares of Beneficial Interest (the “Series B Preferred Shares”) that were redeemed during the first quarter of 2004. FORM 10-K Results of Operations - Year Ended December 31, 2006 Compared to Year Ended December 31, 2005 Revenues Total revenues increased 3.1%, or $9.2 million, for the year ended December 31, 2006. Each revenue category increased for the year ended December 31, 2006 compared to December 31, 2005 primarily due to improved performance at our Mall Properties. Minimum rents Minimum rents increased 1.8%, or $3.3 million, for the year ended December 31, 2006. The increase is due to higher base rent at the Malls of $5.3 million resulting from improved in-line store occupancy and increased rental rates. Lease termination income decreased $82,000 from the prior year. Straight-line rents decreased $1.9 million for the year ended December 31, 2006, compared to the same period in 2005. CORPORATE INFORMATION Tenant reimbursements Tenant reimbursements reflect an increase of 2.2%, or $1.8 million, for the year ended December 31, 2006. This is due to an associated increase of $1.8 million in reimbursable expenses for the year and a 20 basis point improvement in recovery rates. Other revenues Other revenues increased 16.7%, or $3.8 million for the year ended December 31, 2006 compared to the year ended December 31, 2005. The components of other revenues are shown below: 26 Licensing Agreement Income Outparcel Sales Sponsorship Income Management Fees Other Total For the Years Ended December 31, 2006 2005 $ 11,554 $ 13,526 6,220 2,525 1,069 810 2,231 632 5,588 5,359 $ 26,662 $ 22,852 PRESIDENT’S LETTER Inc. (Dec.) $ (1,972) 3,695 259 1,599 229 $ 3,810 Licensing agreement income relates to our tenants with rental agreement terms of less than thirteen months. The decline in this revenue is due to extending the terms of many of these agreements for longer periods. In 2006, revenue from our sales of outparcels primarily related to seven outparcels sold at The Great Mall of the Great Plains (“Great Mall”) Property for $5.9 million in the fourth quarter. The 2005 outparcel income related primarily to sales of undeveloped land in Ohio. The increase in management fee income relates to Properties we own through a joint venture that was formed in late 2005. Expenses Total expenses increased 26.5%, or $51.5 million, for the year ended December 31, 2006. Property operating expenses and real estate taxes increased $1.8 million, the provision for doubtful accounts decreased $75,000, other operating expenses increased $656,000, depreciation and amortization increased $5.5 million, general and administrative costs decreased $3.1 million and impairment losses on held-for-use real estate assets increased $46.7 million. Real estate taxes and property operating expenses Real estate taxes and property operating expenses increased $1.8 million, or 1.9%, for the year ended December 31, 2006. Real estate taxes decreased $288,000, or 0.8%. Successful real estate tax appeals resulted in decreases in real estate taxes at two of our Properties of approximately $783,000 for 2006 compared to the prior year. Offsetting these reductions were increases in real estate taxes for the year ended December 31, 2006 for WestShore Plaza and The Mall at Fairfield Commons of $346,000 and $324,000, respectively. Property operating expenses increased $2.1 million, or 3.4% for the year ended December 31, 2006. Salaries and related expenses were up by $1.1 million. These increases related primarily to wages for our housekeeping and security personnel. Utility expense increased $1.7 million, with the majority of the increase at Jersey Gardens Mall. Offsetting these increases were decreases in parking lot maintenance of $390,000 and snow removal of $835,000. Provision for doubtful accounts The provision for doubtful accounts was $3.7 million for the year ended December 31, 2006 and $3.8 million for 2005. The provision represented 1.2% of revenues in 2006 and 1.3% of revenues in 2005 related to our continuing operations. We have recorded a total provision for doubtful accounts (including discontinued operations) of $6.7 million in 2006 compared to $5.1 million in 2005. The increase relates primarily to aged receivables for sold Properties. Other Operating Expenses Other operating expenses were $9.6 million for the year ended December 31, 2006 compared to $9.0 million for the corresponding period in 2005. Cost associated with outparcel sales increased $432,000, primarily due to costs associated with the outparcel sale at our Great Mall Property. Landlord expenses including utilities and repairs increased $379,000 from 2005 to 2006. Offsetting these increases, our legal expenses decreased in the current year by $264,000 from the prior year. Depreciation and Amortization Depreciation expense increased for the year ended December 31, 2006 by $5.5 million, or 8.2%. The investment of $12 million in improvements to the Nordstrom store at the Lloyd Center Mall increased depreciation 27 PROXY STATEMENT FORM 10-K CORPORATE INFORMATION PRESIDENT’S LETTER $1.2 million from the prior year. Depreciation expense increased at Eastland Ohio by $2.6 million for 2006 compared to 2005, primarily due to the addition of the new Macy’s anchor store that opened in late 2005. General and Administrative General and administrative expense was $15.3 million for the year ended December 31, 2006 compared to $18.4 million for the year ended December 31, 2005. The decrease is due primarily to $3.3 million of charges in 2005 relating to employment agreement ($2.0 million) and a severance agreement ($1.3 million) with two of our former executives. Impairment losses – real estate assets, continuing operations We recognized a $46.7 million non-cash impairment charge on our Great Mall Property during the fourth quarter of 2006. Even though we have no current intentions to sell the Property, we are working on multiple redevelopment opportunities that may involve a substantial reconfiguration of the Property. These plans result in more than temporary declines in future cash flow shortfalls when compared to the carrying value of approximately $89.4 million. Interest expense/capitalized interest Interest expense increased, related to our continuing operations, 14.2%, or $10.6 million, for the year ended December 31, 2006. The summary below identifies the increase by its various components (dollars in thousands). Year Ended December 31, 2006 2005 Inc. (Dec.) $1,375,809 $1,235,267 $ 140,542 6.21% 6.04% 0.17% $ 85,438 2,039 (2,492) 84,985 $ 74,610 2,100 (2,314) 74,396 $ 10,828 (61) (178) $ 10,589 PROXY STATEMENT Average loan balance……………………… Average rate………………………………. Total interest……………………………… Amortization of loan fees…………………. Capitalized interest and other expense, net.. Interest expense…………………………… FORM 10-K $ $ The increase in the “Average loan balance” was primarily the result of funding acquisitions, capital improvements and the Company’s redevelopment program. The variance in “Capitalized interest and other, net” was also primarily due to the increase in construction activity. Equity in income of unconsolidated entities, net The $1.4 million income results primarily from our investment in Puente and Tulsa. This represents our share of the $2.8 million of net income (available after payment of the preferred dividend) for the year ended December 31, 2006 for these Properties for the period during 2006 in which they were held through a joint venture (the “ORC Venture”) with OMERS Realty Corporation (“ORC”), an affiliate of Oxford Properties Group (“Oxford”), which is the global real estate platform for the Ontario (Canada) Municipal Employees Retirement System, a Canadian pension plan. The reconciliation of the net income from the ORC Venture to FFO for these Properties is shown below (in thousands). Year Ended December 31, 2006 $ 2,776 8,892 $ 11,668 $ 6,067 CORPORATE INFORMATION Net income available to joint ventures…………………………….. Add back: Real estate depreciation and amortization………………………. FFO………………….…………………………………………….. Pro-rata share of joint venture FFO………………….……….…… Discontinued Operations During 2006, we sold seven Community Centers for $24.7 million and reflected five Mall Properties as held-for-sale. In connection with the sales, we recorded a net gain on the sale of $1.7 million. We recorded an 28 impairment loss of $65.2 million primarily associated with two of the held-for-sale Malls. The impairment loss is reported in discontinued operations in accordance with SFAS No. 144. During 2005, we sold five Community Centers and one Mall for $18.4 million and reflected seven Community Centers and one Mall as held-for-sale. We reported a net gain of $1.6 million associated with the sale of these Community Centers and the Mall and recorded an impairment loss of $16.4 million. Total revenues for discontinued operations were $44.9 million and $52.6 million for the years ended December 31, 2006 and 2005, respectively. Results of Operations - Year Ended December 31, 2005 Compared to Year Ended December 31, 2004 Revenues Total revenues increased 3.9%, or $11.2 million, for the year ended December 31, 2005. Minimum rents increased $9.0 million, percentage rents increased $207,000, tenant reimbursements increased $3.0 million and other income decreased $1.0 million. Minimum rents PRESIDENT’S LETTER PROXY STATEMENT Minimum rents increased 5.1%, or $9.0 million, for the year ended December 31, 2005. The increase is primarily due to higher base rents at the Properties of $5.8 million and lease termination income increasing by $3.2 million. Tenant reimbursements Tenant reimbursements reflect an increase of 3.6%, or $3.0 million, for the year ended December 31, 2005. The increase in revenues relates to increases in recoverable operating expenses of $1.6 million and an improvement to the recovery rate of 160 basis points compared to 2004. Other revenues The $1.0 million decrease in other revenue is a result of a decrease of $1.8 million in licensing agreement revenue and a decrease of $188,000 in revenue from outparcel sales. These decreases were partially offset by higher fee income of $532,000 primarily related to the acquisition fee earned following the purchase of Puente on December 29, 2005. Expenses Total expenses increased $8.8 million, or 4.7%, for the year ended December 31, 2005. Real estate taxes and property operating expenses increased $1.6 million, the provision for doubtful accounts decreased $507,000, other operating expenses increased $1.1 million, depreciation and amortization increased $2.5 million and general and administrative expenses increased $4.1 million. Real estate taxes and property operating expenses Real estate taxes and property operating expenses increased 1.7%, or $1.6 million, for the year ended December 31, 2005. Real estate taxes increased $2.3 million from 2004 as a result of increases in the assessed value of several Properties and a change in the calculation of commercial property real estate tax at our Properties located in Ohio. The increase was partially offset by a reduction in property operating expenses of $646,000, primarily a result of bringing housekeeping and security services in-house. Provision for doubtful accounts The provision for doubtful accounts was $3.8 million for the year ended December 31, 2005 and $4.3 million for 2004. The provision represented 1.3% of revenues in 2005 and 1.5% of revenues in 2004. The allowance for doubtful accounts has not changed significantly as of December 31, 2005 compared to December 31, 2004. Other operating expenses Other operating expenses were $9.0 million for the year ended December 31, 2005 compared to $7.9 million for the corresponding period in 2004. The increase was primarily due to higher legal fees of $525,000 at the Properties and an increase of $495,000 in costs related to outparcel sales. FORM 10-K CORPORATE INFORMATION 29 Depreciation and Amortization PRESIDENT’S LETTER Depreciation and amortization expense increased for the year ended December 31, 2005 by $2.5 million, or 3.8%. The increase in depreciation and amortization is primarily a result of depreciation for additions to real estate assets and the write-offs related to improvements in spaces vacated by anchor tenants. General and Administrative General and administrative expense was $18.4 million and represented 6.1% of total revenues for the year ended December 31, 2005 compared to $14.3 million and 5.0% of total revenues for 2004. The increase is primarily due to $3.3 million of charges in 2005 relating to an employment agreement ($2.0 million) and a severance agreement ($1.3 million) with two of our former executives; higher professional services fees associated with corporate governance initiatives and increased corporate salaries. Interest expense/capitalized interest PROXY STATEMENT Interest expense decreased, related to our continuing operations, 5.1% or $4.0 million for the year ended December 31, 2005. The summary below identifies the decrease by its various components (dollars in thousands). Year Ended December 31, 2005 2004 Inc. (Dec.) $1,235,267 $1,249,549 $ (14,282) 6.04% 5.93% 0.11% $ 74,610 2,100 (2,314) 74,396 $ 74,099 4,033 227 78,359 $ 511 (1,933) (2,541) $ (3,963) Average loan balance……………………… Average rate………………………………. Total interest……………………………… Amortization of loan fees…………………. Capitalized interest and other expense, net.. Interest expense…………………………… $ $ Costs associated with early extinguishment of debt, which are reflected in interest expense, were $1.8 million for the year ended December 31, 2004. Of this cost, $1.2 million is included under “Amortization of loan fees” and represents the acceleration of loan fee amortization associated with the refinancing of mortgages. Decreases in “Capitalized interest and other expense, net” was due to a significant increase in construction activity resulting in a $1.1 million increase in capitalized interest in 2005. Other items causing the decrease were the settlement of an interest rate swap arrangement of $391,000 and fees associated with a mortgage refinancing of $557,000, both of which occurred in 2004 with no similar expense in 2005. Equity in income of unconsolidated entities, net The $51,000 income results from our investment in Puente. Discontinued Operations During 2005, we sold five Community Centers and one Mall for $18.4 million and reflected seven Community Centers and one Mall as held-for-sale. We reported a net gain of $1.6 million associated with the sale of these Community Centers and the Mall and recorded an impairment loss of $16.4 million, which, in accordance with SFAS No. 144, is reported in discontinued operations. During 2004, we sold twenty-nine Community Centers for $113.3 million and reflected one Community Center as held-for-sale. We recorded a net gain on the sale of discontinued operations of $19.6 million. Total revenues for discontinued operations were $52.6 million and $66.3 million for the years ended December 31, 2005 and 2004, respectively. Liquidity and Capital Resources Liquidity Our short-term (less than one year) liquidity requirements include recurring operating costs, capital expenditures, debt service requirements and dividend and distribution requirements pertaining to our preferred shares, Common Shares and OP Units. We anticipate that these needs will be primarily met with cash flows provided by operations. CORPORATE INFORMATION FORM 10-K 30 Our long-term (greater than one year) liquidity requirements include scheduled debt maturities, capital expenditures to maintain, renovate and expand existing assets, property acquisitions and development projects. Management anticipates that net cash provided by operating activities, the funds available under our credit facility, construction financing, long-term mortgage debt, contributions from our strategic joint venture partnerships, issuance of preferred shares and Common Shares, and proceeds from the sale of assets will provide sufficient capital resources to carry out our business strategy. At December 31, 2006, our total-debt-to-total-market capitalization was 55.3% compared to 56.1% at December 31, 2005. We are working to maintain this ratio in the mid-fifty percent range. We expect to utilize the proceeds from future asset sales to reduce debt and, to the extent that market capitalization remains in the current range, to fund expansion, renovation and redevelopment of existing Properties and the acquisition of additional regional mall properties. Total-debt-to-total-market capitalization is calculated below (dollars and shares in thousands, except stock price). Dec. 31, 2005 Dec. 31, 2006 Stock Price (end of period)……………………………………………………… $ 26.71 $ 24.32 Market Capitalization Ratio: Common Shares outstanding………….……….…….............................……. 36,776 36,506 2,996 3,115 OP Units outstanding……………………………………............................... Total Common Shares and OP Units outstanding at end of period.................. 39,772 39,621 Market capitalization – Common Shares outstanding………………………. Market capitalization – OP Units outstanding……..............................…….. Market capitalization – Preferred Shares……………………………………. Total debt (end of period)…………………………………………………… Total market capitalization………………………………………………….. Total debt/total market capitalization…………………………………………. Total debt/total market capitalization including pro-rata share of joint ventures… Capital Resource Availability $ 982,287 80,023 210,000 1,576,886 $2,849,196 55.3% 56.3% $ 887,826 75,757 210,000 1,501,481 $2,675,064 56.1 % 56.9% PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K In December 2006, we amended our existing unsecured line of credit (the “Prior Credit Facility”) to increase the borrowing availability from $300 million to $470 million (the “Amended Credit Facility”) and extend the maturity date to December 2009 with a one-year extension option available to the Company, subject to the satisfaction of certain conditions. The Amended Credit Facility is expandable to $600 million, subject to certain conditions. The interest rate of the Amended Credit Facility ranges from LIBOR plus 0.95% to LIBOR plus 1.40% depending upon our ratio of debt to total asset value. In December 2005, we formed the ORC Venture with OMERS. The initial acquisition of the ORC Venture was the $170.1 million purchase of Puente. We have a 52% interest in the ORC Venture and ORC has a 48% interest, but GPLP will be entitled to certain preferred payments provided that ORC earns a specified rate of return. As part of the ORC Venture, ORC made $200 million available for acquisitions of certain mall and anchored lifestyle retail properties that GPLP offers to the ORC Venture. The properties to be acquired by the ORC Venture will be operated by us under separate management agreements. During 2006, the ORC Venture utilized $11.3 million of the $200.0 million to acquire Tulsa from GPLP and $188.7 million remains available. Under these agreements, Glimcher will be entitled to management fees, leasing commissions and other compensation including an asset management fee and acquisition fees based upon the purchase price paid for each property. On March 24, 2004, we filed with the SEC a universal shelf registration statement. This registration statement permits us to engage in offerings of debt securities, preferred and common shares, warrants, rights to purchase the Company’s common shares, purchase contracts and any combination of the foregoing. The registration statement was declared effective on April 6, 2004. The amount of securities registered was $400 million, all of which is currently available for future offerings. Cash Activity For the Year Ended December 31, 2006 Net cash provided by operating activities was $96.2 million for the year ended December 31, 2006. 31 CORPORATE INFORMATION Net cash used in investing activities was $108.9 million for the year ended December 31, 2006. On January 17, 2006, we purchased Tulsa, a 927,000 square foot enclosed regional mall located in Tulsa, Oklahoma for $55.7 million. This Property was wholly owned until March 14, 2006 when we received $11.3 million upon transfer of this Property to the ORC Venture. Also, we paid $77.1 million towards our investment in real estate. Of this amount we spent $29.2 million on constructing additional GLA and interior renovations, primarily at The Dayton Mall, Eastland Ohio, Northtown Mall and Lloyd Center. We also spent $21.4 million on tenant improvements to re-tenant existing spaces. Another $9.4 million was spent on operational capital expenditures. The remaining amounts pertain to corporate projects, capitalized wages, real estate taxes and interest. We also invested $13.3 million in our unconsolidated properties. During September 2006, we paid $1.9 million to enter into a joint venture in Surprise, Arizona to develop a 27,000 square foot retail development (“Surprise Venture”). During December 2006, we invested $10.3 million in a joint venture to develop a 650,000 square foot premium retail and office complex in Scottsdale, Arizona (“Scottsdale Venture”). We also increased our investment in Puente by $1.0 million to fund that Property’s ongoing redevelopment program. Offsetting this was the receipt of $24.7 million in connection with the sale of seven non-strategic Community Center assets and $6.8 million received from the sale of outparcels. Net cash provided by financing activities was $16.6 million for the year ended December 31, 2006. During 2006, we received $168.3 million from the issuance of new mortgage debt. This increase was primarily the result of the $35.0 million mortgage on Tulsa entered into subsequent to our acquisition of that particular Mall and the $133.0 million of new mortgage debt associated with the refinancings of Weberstown Mall, Eastland Ohio and Great Mall. We also received net proceeds of $122.0 million from our Amended Credit Facility. These proceeds were used primarily to fund our initial investments in both our Surprise Venture and Scottsdale Venture. We also used these proceeds to defease our University Mall mortgage debt. Offsetting these increases to cash were principal payments of $179.5 million. During 2006, we repaid mortgage debt totaling $153.6 million associated with University Mall, Weberstown Mall, Eastland Ohio and Great Mall. We also repaid $7.7 million of mortgage debt associated with Properties sold during 2006. The remaining payments were normal principal payments associated with mortgage debt. Lastly, we paid $93.8 million in dividend distributions to holders of our Common Shares, OP Units and preferred shares. For the Year Ended December 31, 2005 PROXY STATEMENT PRESIDENT’S LETTER FORM 10-K Net cash provided by operating activities was $108.3 million for the year ended December 31, 2005. Net cash used in investing activities was $120.2 million for the year ended December 31, 2005. During 2005, we spent $95.9 million towards our investment in real estate for i) $63.9 million to construct additional GLA and interior renovations, primarily at Eastland Ohio, The Mall at Fairfield Commons, The Dayton Mall, Lloyd Center and Northtown Mall and the purchase of vacant anchor space at Polaris Fashion Place, ii) $12.8 million on tenant improvements and allowances to re-tenant existing space, iii) $7.7 million for the acquisition of land in connection with the development of an anchored retail project to serve the Cincinnati, Ohio market (“City Park development”), iv) $4.6 million on operational capital expenditures and v) $6.9 million on other items such as corporate projects, capitalized wages, real estate taxes and interest. We also spent $44.2 million in connection with our investment, through the ORC Venture, in Puente. The remaining amounts pertain to corporate projects, capitalized wages, real estate taxes and interest. Offsetting these capital outlays, we received $23.6 million in proceeds from the sale of i) Southside Mall, ($13.0 million), ii) the former Lord & Taylor anchor space at Polaris Fashion Place ($5.3 million) and iii) the sale of 5 Community Centers ($5.3 million). We also received $3.0 million from the sale of outparcels. Net cash provided by financing activities was $11.2 million for the year ended December 31, 2005. During 2005, we received $111.7 from the issuance of mortgage notes payable. These funds were received in connection with the new $44.0 million mortgage loan on Montgomery Mall, the new $50.0 million mortgage loan on River Valley Mall and $17.7 million for the construction loan in connection with the redevelopment activities at Eastland Ohio. Also, we received net proceeds of $76.0 million from our Prior Credit Facility of which the majority of the proceeds were used to fund numerous redevelopment projects that are currently ongoing. Offsetting these increases was the $88.4 million paid for principal payments on existing mortgage debt. This amount consisted of the extinguishment of the existing mortgage on Montgomery Mall and Southside Mall as well as normal principal payments. We also paid $92.9 million in dividend distributions to holders of our Common Shares, OP Units and preferred shares. CORPORATE INFORMATION 32 For the Year Ended December 31, 2004 PRESIDENT’S LETTER Net cash provided by operating activities was $102.3 million for the year ended December 31, 2004. Net cash provided by investing activities was $38.1 million for the year ended December 31, 2004. The primary uses were the investments in real estate of $72.7 million. These real estate investments were for development and redevelopment activities of $12.7 million, property capital expenditures of $16.2 million and the cash portion of the purchase price related to Polaris Fashion Place and Polaris Towne Center of $42.9 million. We received proceeds of $106.8 million from the sale of twenty-nine Community Centers and $2.7 million from the sale of outparcels. Net cash used in financing activities was $143.0 million for the year ended December 31, 2004. Proceeds were received from the issuance of $150 million of the Series G Preferred Shares, which totaled a net amount of $144.8 million. This amount was offset by the redemption of the Series B Preferred Shares totaling $128.0 million. We received $231.5 million from the issuance of mortgage notes payable. In the first quarter of 2004, we received $36.5 million in loan proceeds that was used to fund the acquisition of the remaining joint venture interest in Polaris Fashion Place not previously owned by the Company (the “Polaris acquisition”). During the second quarter of 2004, we refinanced Jersey Gardens Mall with a $165.0 million permanent mortgage loan and refinanced Great Mall with a $30.0 million two-year bridge facility. Cash used to repay mortgage notes payable was $303.4 million, of which $292.7 million related to repayment of the previous debt on Jersey Gardens Mall, Great Mall, River Valley Mall and a bridge facility associated with the Polaris acquisition. The remainder of the repayment amount relates to scheduled debt amortizations of $17.2 million. We also paid $89.2 million in dividend distributions. Financing Activity Total debt increased by $75.4 million during 2006. The change in outstanding borrowings is summarized as follows (in thousands): Mortgage Notes Total Notes Payable Debt December 31, 2005………………………….. $1,351,481 $ 150,000 $1,501,481 New mortgage debt………………………….. 168,331 168,331 Repayment of debt…………………………... (161,237) (161,237) Debt assignment to ORC Venture…………… (35,000) (35,000) Debt amortization payments in 2006………... (18,260) (18,260) Amortization of fair value adjustment………. (429) (429) Net borrowings, line of credit……………….. 122,000 122,000 December 31, 2006………………….………. $1,304,886 $272,000 $1,576,886 During 2006, we entered into four new financing arrangements and modified three existing arrangements. On January 13, 2006, the Company entered into a loan agreement to borrow $30.0 million (the “Great Mall Loan”). The Great Mall Loan is represented by a promissory note secured by a first mortgage lien and assignment of leases and rents on Great Mall. The Great Mall Loan has a floating interest rate of LIBOR plus 1.65% per annum and a maturity date of January 12, 2009. The interest rate for the Great Mall Loan was subsequently fixed through an interest rate protection agreement at 6.35% through January 15, 2008. The Great Mall Loan requires the Company to make interest only periodic payments with all outstanding principal and accrued interest being due and payable at the maturity date. The proceeds of the Great Mall Loan were used to payoff the previous loan in the same amount. Also on January 13, 2006, we amended the $25 million mortgage loan agreement on Montgomery Mall to reduce the interest rate to LIBOR plus 1.65% from LIBOR plus 1.85%. After extending the loan for six months on July 31, 2006, the $25 million mortgage was repaid on January 22, 2007. On March 14, 2006, we entered into a loan agreement to borrow $35 million initially (the “Tulsa Loan”) and up to $50 million in total as part of a mortgage financing arrangement for Tulsa. The Tulsa Loan is represented by two promissory notes secured by a first mortgage lien and assignment of leases and rents on Tulsa. The Tulsa Loan had an initial floating interest rate of LIBOR plus 1.35% per annum and has a maturity date of March 14, 2009. The initial interest rate for the Tulsa Loan was subsequently fixed at a rate of 6.52% through an interest rate protection agreement. Under the Tulsa Loan, we are required to make interest only periodic payments for the length of the term. On May 25, 2006, we executed a loan agreement to borrow $60 million (the “Weberstown Loan”). The Weberstown Loan is represented by two promissory notes secured by a first mortgage lien and assignment of leases and rents on Weberstown Mall located in Stockton, California. The Weberstown Loan has a fixed interest rate of 5.90% per annum and a maturity date of June 8, 2016. Under the Weberstown Loan, we are required to make interest only periodic payments for the length of the term. We are not permitted under the Weberstown Loan to make any prepayments on outstanding principal 33 PROXY STATEMENT FORM 10-K CORPORATE INFORMATION PRESIDENT’S LETTER until three months prior to the maturity date. On November 20, 2006, we entered into a Loan Agreement to borrow $43 million (the “Eastland Columbus Loan”). The Eastland Columbus Loan is represented by a promissory note secured by a first mortgage lien on Eastland Ohio. The Eastland Columbus Loan has a fixed interest rate of 5.87% per annum and a maturity date of December 11, 2016. Under the Eastland Columbus Loan, we are required to make interest only periodic payments for the first two years of the loan’s term and then, beginning in December 2008, payments of interest and principal. We are not permitted under the Eastland Columbus Loan to make any prepayments on outstanding principal prior to the maturity date. At December 31, 2006, our mortgage notes payable were collateralized with first mortgage liens on 23 Properties having a net book value of $1,444.2 million. We also owned 5 unencumbered Properties and other corporate assets having a net book value of $239.4 million at that date. Certain of our loans have multiple Properties as collateral for such loans and have cross-default provisions. Under the cross-default provisions, a default under a single mortgage included in a cross-defaulted loan may constitute a default under all of the mortgages under that loan and may lead to acceleration of the indebtedness due on each Property within the collateral pool. Properties which are subject to cross-default provisions have a total net book value of $81.0 million and represent one Community Center and three Malls. Properties under such crossdefault provisions relate to i) the Morgantown Mall Associates LP loan securing two Properties with a net book value of $41.5 million and ii) the SAN Mall LP loan securing two Properties with a net book value of $39.5 million. Financing Activity – Joint Ventures Within the ORC Venture, the total debt increased by $33.9 million during 2006. The change in outstanding borrowings is summarized as follows (in thousands): Mortgage Notes GRT Share (52%) $ 88,212 $ 45,870 December 31, 2005……………………… 35,000 18,200 Assumed mortgage debt…………………. (1,308) (680) Debt amortization payments in 2006……. 195 102 Amortization of fair value adjustment…... $ 122,099 $ 63,492 December 31, 2006……………………… FORM 10-K PROXY STATEMENT At December 31, 2006, the mortgage notes payable were collateralized with first mortgage liens on two Properties having a net book value of $242.8 million. The ORC Venture assumed the Tulsa Loan as part of GPLP’s transfer of Tulsa to the ORC Venture on March 14, 2006. We also had joint venture interests in two unencumbered real estate parcels connected with our Surprise Venture and Scottsdale Venture having a net book value of $4.1 million at December 31, 2006. Contractual Obligations and Commitments The following table shows the Company’s contractual obligations and commitments as of December 31, 2006 related to our consolidated operations as well as our pro-rata share of our obligations under our joint venture arrangements (in thousands): CORPORATE INFORMATION Consolidated Obligations and Commitments: Long-term debt (includes interest payments)…….. Distribution obligations……………………….….. OP Unit redemptions……………………………... Lease obligations…………………………………. Tenant allowances…………………………….….. Purchase obligations……………………………… Total consolidated obligations and commitments... Pro-rata share of joint venture obligations: Ground lease obligation…………………………... Long-term debt (includes interest payments)…….. Tenant allowances………………………………… Purchase obligations……………………………… Total commercial obligations………………… Total $2,039,360 58,284 80,645 2,246 26,279 13,935 $2,220,749 Total $ 143,523 70,864 1,297 5,779 $ 221,463 2007 $ 206,529 36,564 80,645 1,322 26,279 13,935 $ 365,274 2007 2,600 4,253 1,297 5,779 $ 13,929 $ 2008-2009 $615,390 21,720 780 $637,890 2008-2009 $ 5,318 66,611 $ 71,929 2010-2011 $238,210 101 $238,311 2010-2011 $5,478 $5,478 Thereafter $979,231 43 $979,274 Thereafter $130,127 $130,127 34 Consolidated Obligations and Commitments PRESIDENT’S LETTER Long-term debt obligations are shown including both scheduled interest and principal payments. The nature of the obligations is disclosed in the Notes to the consolidated financial statements. At December 31, 2006, we had the following obligations relating to dividend distributions. In the fourth quarter of 2006, the Company declared distributions of $0.4808 per Common Share ($19.1 million) to be paid during the first quarter of 2007. Series F Preferred Shares and Series G Preferred Shares are not required to be redeemed and therefore, the dividends on those shares may be paid in perpetuity. However, as the Series F Preferred Shares are redeemable at our option on or after August 25, 2008, the obligation for the dividends for the Series F Preferred Shares are included in the contractual obligations through that date. Also, as the Series G Preferred Shares are redeemable at our option on or after February 23, 2009, the obligation for the dividends for the Series G Preferred Shares are also included in the contractual obligations through that date. The total dividend obligation for the Series F Preferred Shares and Series G Preferred Shares is $10.0 million and $29.2 million, respectively. Lease obligations include both our capital and operating lease obligations. Capital lease obligations are for security equipment and generators at various Properties and are included in accounts payable and accrued expenses in the consolidated balance sheet. Operating lease obligations are for office space, ground leases, phone system, office equipment, computer equipment and other miscellaneous items. The obligation for these leases at December 31, 2006 was $2.2 million. At December 31, 2006, we had executed leases committing to $26.3 million in tenant allowances. The leases will generate gross rents of approximately $95.5 million over the original lease term. Purchase obligations relate primarily to construction contract commitments. At December 31, 2006, there were approximately 3.0 million OP Units outstanding. These OP Units are redeemable, at the option of the holders, beginning on the first anniversary of their issuance. The redemption price for an OP Unit shall be, at the option of GPLP, payable in the following form and amount: (a) cash at a price equal to the fair market value of one Common Share of the Company or (b) Common Shares at the exchange ratio of one share for each OP Unit. The fair value of the OP Units outstanding at December 31, 2006 is $80.6 million based upon a per unit value of $26.92 at December 31, 2006, (based upon a five-day average of the Common Stock price from December 21, 2006 to December 28, 2006). Pro-rata share of joint venture obligations In the second quarter of 2006, the Company announced the Scottsdale Venture, a joint venture between GPLP and Vanguard City Home, an affiliate of the Wolff Company. The parties will conduct the operations of the Scottsdale Venture through a limited liability company (“LLC Co.”) of which GPLP is the managing member. The LLC Co. will coordinate and manage the construction of the Scottsdale Crossing development, an approximately 650,000 square foot premium retail and office complex to be developed in Scottsdale, Arizona. GPLP has made an initial capital contribution of approximately $10.3 million to LLC Co. and holds a 50% interest in LLC Co. Upon completion of the Scottsdale Crossing development, the LLC Co. will own and operate (on land subject to a ground lease, the landlord of which is an affiliate of Wolff Company, under which the LLC Co. is the tenant) the Scottsdale Crossing development. Related to the Scottsdale Venture, the Company and LLC Co. have the following commitments: o Letter of Credit: LLC Co. has provided a letter of credit in the amount of $20 million to serve as security for the construction at the Scottsdale Crossing development. LLC Co. shall maintain the letter of credit until substantial completion of the construction of the Scottsdale Crossing development occurs. o Lease Payment: The LLC Co. shall make rent payments under a ground lease executed as part of the Scottsdale Venture. The initial base rent under the ground lease is $5.2 million per year during the first year of the lease term and shall be periodically increased 1.5% to 2% during the lease term until the fortieth year of the lease term and marked to market thereafter (“Base Rent”). Additionally, the LLC Co. has provided the landlord with a security deposit consisting of a portfolio of U.S. government securities valued at approximately $19 million (the “Deposit”) which will be used: i) to make base rent payments under the ground lease for the first forty-seven months of the ground lease’s initial term, ii) as security for LLC Co.’s performance under the ground lease, and iii) in the event of LLC Co,’s default, to pay base rent or additional rent under the ground lease for the first forty-seven months of the ground lease’s initial term as well as any other charges 35 PROXY STATEMENT FORM 10-K CORPORATE INFORMATION PRESIDENT’S LETTER related to a LLC Co.’s default under the ground lease. After the first forty-seven months of the ground lease’s initial term, any remaining portion of the Deposit shall be returned to LLC Co. A portion of GPLP’s capital contribution will be used to fund its pro rata share of LLC Co.’s payments under the ground lease. o Property Purchase: LLC Co. will purchase certain retail units consisting of approximately 82,000 square feet in a condominium to be built as a part of the Scottsdale Crossing development at a price of $181 per square foot. The long-term debt obligation is our pro-rata share of the scheduled payments of interest and principle related to our loans at Puente and Tulsa. The tenant allowances relate to both the ORC Venture and the Scottsdale Venture for tenants who have signed leases at our Puente, Scottsdale Crossing and Tulsa Properties. Our pro-rata share of purchase obligations primarily relate to construction commitments for our redevelopment work at Puente. Capital Expenditures PROXY STATEMENT We plan our capital expenditures by considering various factors such as: return on investment, our five-year capital plan for major facility expenditures such as roof and parking lot repairs and tenant construction allowances based upon the economics of the lease terms and cash available for making such expenditures. We categorize our capital expenditures into two broad categories, first-generation and second-generation expenditures. The firstgeneration expenditures relate to incremental revenues associated with new developments or creation of new GLA at our existing Properties. Second-generation expenditures are those expenditures associated with maintaining the current income stream and are generally expenditures made to maintain the Properties and to replace tenants for spaces that have been previously occupied. Capital expenditures are generally accumulated into a project and classified as “developments in progress” on the consolidated balance sheet until such time as the project is completed. At the time the project is complete, the dollars are transferred to the appropriate category on the balance sheet and are depreciated on a straight-line basis over the estimated useful life of the asset. We invested approximately $28 million in redevelopment activity in 2006. These projects focused primarily on eight Malls. In addition, we invested $29 million in property capital expenditures for both operational needs and tenant improvements and $2 million in renovations. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements (as defined in Item 303 of Regulation S-K). Acquisitions of Additional Properties In December 2005, we formed the ORC Venture with an affiliate of Oxford, which is the global real estate platform for the Ontario (Canada) Municipal Employees Retirement System, a Canadian pension plan. The initial acquisition of the ORC Venture was the $170.1 million purchase of Puente. We have a 52% interest in the ORC Venture and ORC has a 48% interest, but GPLP will be entitled to certain preferred payments provided that ORC earns a specified rate of return. In connection with the acquisition, the ORC Venture assumed an $88.8 million nonrecourse mortgage loan, with the remainder of the purchase price being funded by contributions to the ORC Venture from GPLP and ORC. CORPORATE INFORMATION FORM 10-K In addition to our acquisition of Puente through the ORC Venture, we also acquired Tulsa on January 17, 2006. Tulsa is a regional mall located in Tulsa, Oklahoma with approximately 927,000 square feet of GLA. The purchase price was $58.3 million and we did not assume any debt in connection with this purchase. We funded the acquisition with funds made available through our Prior Credit Facility. On March 14, 2006, we transferred our 100% interest in Tulsa into the ORC Venture and continue to hold a 52% interest through the joint venture. Expansion, Renovation and Development Activity We continue to be active in expansion, renovation and development activities. Our business strategy is to grow the Company’s assets, net income and cash flow to, among other things, provide for dividend requirements and to preserve, maintain and expand value for shareholders. 36 Expansions and Renovations PRESIDENT’S LETTER We maintain a strategy of selective expansions and renovations in order to improve the operating performance and the competitive position of our existing portfolio. We also engage in an active redevelopment program with the objective of attracting innovative retailers, which we believe will enhance the operating performance of the Properties. Malls In 2006 we added a lifestyle retail component to The Dayton Mall in Dayton, Ohio further enhancing the strong market share already enjoyed by this Property. The Dayton Mall project includes a façade renovation and the addition of 116,000 square feet of new retail GLA in a new open-air center and additional outward-facing retail stores. This addition was over 50% occupied at December 31, 2006 and is anticipated to be more than 80% occupied upon the opening of several new retail stores committed for 2007. The Polaris Fashion Place redevelopment project, located in Columbus, Ohio, centers around a replacement anchor store for the vacated Lord & Taylor anchor store (the “Lord & Taylor parcel”). On May 16, 2005, we purchased the Lord & Taylor parcel from The May Department Stores Company. On July 20, 2005, we sold the Lord & Taylor parcel to Von Maur, Inc., an Iowa-based fashion specialty retailer (“Von Maur”). During the fourth quarter of 2005, Von Maur opened its first Ohio store in the 140,000 square foot anchor space. In addition, a newly constructed approximately 9,450 square foot multi-tenant building and some new restaurants have opened. Retailers in this new addition to Polaris Fashion Place include: Mimi’s Café, Potbelly Sandwiches and Omaha Steaks. In 2007, we have plans to purchase the former Kauffman’s anchor store from Federated Department Stores, Inc. and redevelop the space with an outward facing “Main Street Retail” style component. Redevelopment work is in process at Northtown Mall in Blaine, Minnesota. The expansion project included tripling the size of the food court, installing new exterior signage, adding a new 10,000 square foot freestanding building and demolishing a vacant anchor store in order to replace it with a new Home Depot store. We expect the new Home Depot anchor store to open in the first quarter of 2007. We have re-development plans for The Mall at Johnson City (“MJC”) in Johnson City, Tennessee. We plan to construct a new Dick’s Sporting Goods store that is anticipated to open in the second quarter of 2008. In addition, we plan to complete a store remodel and add approximately 35,000 square feet to the JCPenney anchor store at the Mall. Developments One of our objectives is to increase our portfolio by developing new retail properties. Our management team has developed over 100 retail properties nationwide and has significant experience in all phases of the development process including: site selection, zoning, design, pre-development leasing, construction financing and construction management. Our Scottsdale Crossing development will be an approximately 650,000 square foot complex consisting of approximately 380,000 square feet of retail space with approximately 270,000 square feet of additional office space constructed above the retail units. The Scottsdale Venture intends to retain a third party company to lease the office portion of the complex. Our Scottsdale Crossing development will be adjacent to a hotel and residential complex that will be developed independently by an affiliate of The Wolff Company, an affiliate of which is our joint venture partner in this development. Once completed, we anticipate that the Scottsdale Crossing development will be a dynamic, outdoor urban environment featuring sophisticated architectural design, comfortable pedestrian plazas, a grand central park space, and a variety of upscale shopping, dining and entertainment options. The Scottsdale Venture entered into a long-term ground lease for property on which a portion of the project will be constructed. We own a 50% interest in the Scottsdale Venture and will operate and lease the retail portion of the project under a separate management agreement. Opening of the approximately $200 million development is anticipated during 2009. Our Surprise Venture will be developing a new retail site in Surprise, Arizona (northwest of Phoenix). This five-acre development will consist of approximately 27,000 square feet of new retail space. GPLP also has an option agreement for a 100-acre site contiguous to this five-acre development and is evaluating potential development of this site. PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 37 Portfolio Data PRESIDENT’S LETTER The table below reflects Mall sales per square foot (“Sales PSF”) for those tenants reporting sales for the twelve-month period ended December 31, 2006. The percentage change is based on those tenants reporting sales (“Same Store”) for the twenty-four month period ended December 31, 2006. Wholly Owned Mall Properties Average Same Store Sales PSF % Change Anchors………………………………. $137 (4.1)% Stores (1)……………………………... $348 0.7% Total………………………………….. $231 (0.7)% (1) Sales PSF for Mall Stores exclude outparcel and licensing agreement sales. Total Mall Properties Including ORC Venture Average Same Store Sales PSF % Change $136 (4.1)% $344 0.7% $231 (0.7)% PROXY STATEMENT As we continue to upgrade our tenant mix, we believe our regional mall portfolio will continue to deliver solid performance in the areas of sales productivity and rents. Average mall store sales for the 12 months ended December 31, 2006 were $348 per square foot, a 4.2% improvement from the $334 per square foot reported for the twelve months ended December 31, 2005. Comparable stores sales, which include only those stores open for the twelve months ended December 31, 2006 and the same period of 2005, increased 0.7%. Portfolio occupancy statistics by property type are summarized below: 12/31/06 Wholly-owned Malls: Mall Anchors…………………….………. Mall Stores……………………….………. Total Consolidated Mall Portfolio.………. Mall Portfolio including ORC Venture: Mall Anchors…………………………….. Mall Stores……………………...………... Total Mall Portfolio……………….……... Wholly-owned Community Centers: Community Center Anchors……………... Community Center Stores………………... Total Community Center Portfolio………. Comparable Property Type (2) Comparable Mall Stores………………………………... Comparable Mall Portfolio……………………………... Comparable Community Center Stores………………… Comparable Community Center Portfolio……………… 93.9% 91.7% 93.1% 9/30/06 94.2% 89.0% 92.3% Occupancy (1) 6/30/06 95.3% 87.9% 92.6% 3/31/06 95.0% 87.3% 92.3% 12/31/05 95.2% 89.5% 93.2% FORM 10-K 94.3% 91.5% 93.3% 94.6% 88.6% 92.4% 95.7% 87.3% 92.7% 95.5% 86.5% 92.3% 95.5% 89.2% 93.2% 81.1% 85.2% 82.2% 70.6% 85.2% 74.2% 12/31/2006 91.8% 93.2% 85.2% 82.2% 68.7% 80.6% 71.3% 73.6% 79.7% 75.1% 12/31/05 89.2% 93.2% 87.4% 77.1% 75.0% 78.6% 75.8% CORPORATE INFORMATION (1) Occupied space is defined as any space where a tenant is occupying the space or paying rent at the date indicated, excluding all tenants with leases having an initial term of less than one year. (2) Comparable occupancy rates (total portfolio including ORC Venture) exclude the properties sold after 12/31/2005 from the 12/31/2005 occupancy calculation and those acquired after 12/31/2005 from the 12/31/2006 calculation. Mall store occupancy (for our wholly-owned Malls) increased to 91.7% at December 31, 2006 from 89.5% at December 31, 2005. Mall store occupancy improvements were driven primarily by our held-for-investment Malls. If you exclude our five held-for-sale assets, store occupancy was 94.4% at December 31, 2006 compared to 91.0% at December 31, 2005. Anchor store occupancy (for our wholly-owned Malls) decreased to 93.9% at December 31, 2006 from 95.2% at December 31, 2005. Part of the anchor store occupancy decline resulted from a Wal-Mart lease termination at Ashland Town Center in Ashland, Kentucky related to our strategic re-development of that Property. We also re-classified in-line store GLA to anchor store GLA at MJC and University Mall in Tampa, Florida in anticipation of two new anchor store openings in 2007. Further contributing to the decline was the closing of the 38 Marshall’s anchor store at Great Mall. These occupancy declines were partially offset by a new Border’s Bookstore opening at The Dayton Mall in Dayton, Ohio. Information Technology We implemented the budgeting and forecasting components of our commercial management system in 2006. We also implemented the first phase of a new business intelligence platform in December 2006. These key technology initiatives will establish the platform for enhanced internal management reporting in 2007. Accounting Pronouncements In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” While this standard does not establish any new requirements for reporting assets or liabilities at fair value, it does clarify the definition of “fair value” when used in FASB pronouncements. This standard is effective no later than for fiscal years beginning after November 15, 2007. The Company does not anticipate a material impact to the Company’s financial position and results of operations. PRESIDENT’S LETTER PROXY STATEMENT In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes; an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” It requires a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, in an income tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will be required to adopt this interpretation in the first quarter of fiscal year 2007. While the Company is currently evaluating the provisions of FIN 48, the adoption is not expected to have a material impact on its financial position and results of operations. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Our primary market risk exposure is interest rate risk. We use interest rate protection agreements to manage interest rate risks associated with long-term, floating rate debt. At December 31, 2006, approximately 85.6% of our debt, after giving effect to interest rate protection agreements, bore interest at fixed rates with weighted-average maturity of 5.7 years and a weighted-average interest rate of approximately 6.3%. At December 31, 2005 approximately 82.8% of our debt, after giving effect to interest rate protection agreements, bore interest at fixed rates with weighted-average maturity of 6.7 years, and a weighted-average interest rate of approximately 6.35%. The remainder of our debt at December 31, 2006 and December 31, 2005, bears interest at variable rates with weightedaverage interest rates of approximately 6.56% and 5.96%, respectively. At December 31, 2006 and December 31, 2005, the fair value of our debt (excluding our Amended Credit Facility) was $1,282.0 million and $1,358.7 million, respectively, compared to its carrying amounts of $1,304.9 million and $1,351.5 million, respectively. Our combined future earnings, cash flows and fair values relating to financial instruments are dependent upon prevalent market rates of interest, primarily LIBOR. Based upon consolidated indebtedness and interest rates at December 31, 2006 and 2005, a 100 basis points increase in the market rates of interest would decrease future earnings and cash flows by $2.3 million and $2.5 million, respectively, for the year. Also, the fair value of debt would decrease by approximately $54.3 million and $36.7 million at December 31, 2006 and December 31, 2005, respectively. A 100 basis points decrease in the market rates of interest would increase future earnings and cash flows by $2.3 million and $2.5 million for the years ended December 31, 2006 and 2005, respectively, and increase the fair value of our debt by approximately $57.8 million and $39.1 million at December 31, 2006 and December 31, 2005, respectively. We have entered into certain swap agreements which impact this analysis at certain LIBOR rate levels (see Note 9 to the consolidated financial statements). Item 8. Financial Statements and Supplementary Data The consolidated financial statements and financial statement schedules of GRT and the Report of Independent Registered Public Accounting Firm thereon, to be filed pursuant to this Item 8 are included in this report in Item 15. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None 39 FORM 10-K CORPORATE INFORMATION Item 9A. Controls and Procedures PRESIDENT’S LETTER Disclosure Controls and Procedures The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. The Company’s disclosure controls and procedures are designed to provide reasonable assurance that information is recorded, processed, summarized and reported accurately and on a timely basis in the Company’s periodic reports filed with the SEC. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective to provide reasonable assurance. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute assurance, that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. As of December 31, 2006, management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria for effective internal control over financial reporting established in "Internal Control -- Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management has concluded that as of December 31, 2006, the Company’s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our independent registered public accounting firm, BDO Seidman, LLP, audited management’s assessment and independently assessed the effectiveness of the Company’s internal control over financial reporting. BDO Seidman, LLP has issued an attestation report concurring with management’s assessment, which is set forth below. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 40 Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting Board of Trustees and Shareholders Glimcher Realty Trust Columbus, Ohio We have audited management's assessment, included in the accompanying “Management’s Report on Internal Control over Financial Reporting”, that Glimcher Realty Trust maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Glimcher Realty Trust’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. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of 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, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, 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 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 accepted 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that 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, management's assessment that Glimcher Realty Trust maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also in our opinion, Glimcher Realty Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Glimcher Realty Trust as of December 31, 2006 and December 31, 2005 and the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for each of the three years ending December 31, 2006 of Glimcher Realty Trust and our report dated February 20, 2007 expressed an unqualified opinion on those consolidated financial statements. Chicago, Illinois February 20, 2007 /s/ BDO Seidman, LLP PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION Internal Control Over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 41 Item 9B. Other Information PRESIDENT’S LETTER None PART III Item 10. Trustees, Executive Officers and Corporate Governance Information regarding trustees, board committee members, corporate governance and the executive officers of the Registrant is incorporated herein by reference to GRT’s definitive proxy statement to be filed with the SEC within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting. Item 11. Executive Compensation Information regarding executive compensation of the Company’s executive officers is incorporated herein by reference to the Registrant’s definitive proxy statement to be filed with the SEC within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Information regarding the Company’s equity compensation plans in effect as of December 31, 2006 is as follows: Equity Compensation Plan Information Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (c) 477,503 PROXY STATEMENT FORM 10-K Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) Weighted average exercise price of outstanding options, warrants and rights (b) $21.52 Equity compensation plans approved by shareholders 2,132,132 Equity compensation plans not approved by shareholders N/A N/A N/A Additional information regarding security ownership of certain beneficial owners and management of the Registrant is incorporated herein by reference to GRT’s definitive proxy statement to be filed with the SEC within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting. CORPORATE INFORMATION Item 13. Certain Relationships and Related Transactions, and Trustee Independence Information regarding certain relationships, related transactions and trustee independence of the Company is incorporated herein by reference to GRT’s definitive proxy statement to be filed with the SEC within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting. Item 14. Principal Accountant Fees and Services Information regarding principal accountant fees and services of the Company is incorporated herein by reference to GRT’s definitive proxy statement to be filed with the SEC within 120 days after the end of the year covered by this Form 10-K with respect to the Annual Meeting. 42 Item 15. Exhibits and Financial Statements PRESIDENT’S LETTER (1) Financial Statements - Report of Independent Registered Public Accounting Firm ................. - Glimcher Realty Trust Consolidated Balance Sheets as of December 31, 2006 and 2005 ............................................................. - Glimcher Realty Trust Consolidated Statements of Operations and Comprehensive Income for the years ended December 31, 2006, 2005 and 2004 ................................................................................ - Glimcher Realty Trust Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2006, 2005 and 2004 ........ - Glimcher Realty Trust Consolidated Statements of Cash Flows for the years ended December 31, 2006, 2005 and 2004 .................... - Notes to Consolidated Financial Statements......................................... Financial Statement Schedules - Schedule III - Real Estate and Accumulated Depreciation ................... - Notes to Schedule III ............................................................................ Exhibits Page Number 51 52 53 54 55 56 PROXY STATEMENT (2) 80 84 (3) 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 4.1 4.2 4.3 10.01 10.02 10.03 10.04 10.05 10.06 10.07 10.08 10.09 Amended and Restated Declaration of Trust of Glimcher Realty Trust. (1) Bylaws, as amended. (1) Amendment to the Company's Amended and Restated Declaration of Trust. (2) Limited Partnership Agreement of Glimcher Properties Limited Partnership. (3) Amendment to Limited Partnership Agreement of Glimcher Properties Limited Partnership. (3) Amendment No. 1 to Limited Partnership Agreement of Glimcher Properties Limited Partnership. (3) Amendment No. 2 to Limited Partnership Agreement of Glimcher Properties Limited Partnership. (3) Amendment No. 3 to Limited Partnership Agreement of Glimcher Properties Limited Partnership. (3) Amendment No. 4 to Limited Partnership Agreement of Glimcher Properties Limited Partnership. (3) Amendment No. 5 to Limited Partnership Agreement of Glimcher Properties Limited Partnership. (3) Amendment No. 6 to Limited Partnership Agreement of Glimcher Properties Limited Partnership. (3) Amendment No. 7 to Limited Partnership Agreement of Glimcher Properties Limited Partnership dated August 7, 2003. (8) Amendment No. 8 to Limited Partnership agreement of Glimcher Properties Limited Partnership. (10) Articles Supplementary classifying 2,800,000 Shares of Beneficial Interest as 8.75% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest of the Registrant. (15) Articles Supplementary Classifying 6,900,000 Shares of Beneficial Interest as 8.125% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest of the Registrant, par value $0.01 per share. (16) Specimen Certificate for Common Shares of Beneficial Interest. (1) Specimen Certificate for evidencing 8.75% Series F Cumulative Redeemable Preferred Shares of Beneficial Interest. (15) Specimen Certificate for evidencing 8.125% Series G Cumulative Redeemable Preferred Shares of Beneficial Interest. (16) Glimcher Realty Trust 1993 Employee Share Option Plan. (1) Glimcher Realty Trust 1993 Trustee Share Option Plan. (1) Glimcher Realty Trust 1997 Incentive Plan. (3) Glimcher Realty Trust 2004 Incentive Compensation Plan. (17) Exhibit A to Glimcher Properties Limited Partnership Agreement, as amended, as of December 31, 2006. Severance Benefits Agreement, dated June 11, 1997, by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and Herbert Glimcher. (3) Severance Agreement and Release of All Claims between William G. Cornely, Glimcher Realty Trust, its affiliated and subsidiary entities, and its shareholders, directors, officers, agents, employees, successors and assigns, dated as of July 1, 2005. (5) Severance Benefits Agreement dated June 11, 1997, by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and Michael P. Glimcher. (3) Severance Benefits Agreement, dated June 11, 1997, by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and George A. Schmidt. (3) 43 FORM 10-K CORPORATE INFORMATION 10.10 PRESIDENT’S LETTER 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23 FORM 10-K 10.24 10.25 10.26 10.27 10.28 10.29 CORPORATE INFORMATION 10.30 10.31 10.32 10.33 10.34 10.35 10.36 Severance Benefits Agreement, dated June 26, 2002, by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and Thomas J. Drought, Jr. (20) Severance Benefits Agreement, dated June 28, 2004 by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and Lisa A. Indest. (22) Severance Benefits Agreement, dated August 30, 2004, by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and Mark E. Yale. (11) Severance Benefits Agreement, dated May 16, 2005, by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and Marshall A. Loeb. (24) Severance Benefits Agreement, dated May 16, 2005, by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and George “Buck” Sappenfield, III. (24) Severance Benefits Agreement, dated August 17, 2005, by and among Glimcher Realty Trust, Glimcher Properties Limited Partnership and Robert F. Beffa. (25) First Amendment to the Severance Benefits Agreement, dated September 8, 2006 by and between Glimcher Realty Trust, Glimcher Properties Limited Partnership, and Mark E. Yale. (7) Offer Letter of Employment to Marshall A. Loeb, dated April 26, 2005. (23) Offer Letter of Employment to George “Buck” Sappenfield, III, dated May 9, 2005. (24) Offer Letter of Employment to Robert Beffa, dated June 29, 2005. (5) Defeasance Pledge And Security Agreement, Dated As Of December 22, 2006 by and among Glimcher University Mall Limited Partnership, Lasalle National Bank Association (f/k/a Lasalle National Bank), as Trustee for Nomura Asset Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 1998-D6, and Wells Fargo Bank, N.A. Defeasance, Assignment, Assumption and Release Agreement, dated as of December 22, 2006, by and among Glimcher University Mall Limited Partnership, SB NASC 1998-D6 Holdings, LLC, Lasalle National Bank Association (f/k/a Lasalle National Bank), as Trustee For Nomura Asset Securities Corporation, Commercial Mortgage Pass-Through Certificates, Series 1998-D6, Capmark Finance Inc., and Wells Fargo Bank, N.A. Promissory Note, dated as of July 31, 2005, issued by Glimcher Properties, L.P. and Montgomery Mall Associates, L.P. in the principal amount of $44,000,000 (relates to Montgomery Mall). (26) Term Loan Agreement, dated as of July 31, 2005, between Glimcher Properties, L.P. and Montgomery Mall Associates, L.P. (each as co-borrower) and KeyBank National Association. (26) Amended and Restated Mortgage, Assignment of Rents, Security Agreement and Fixture Filing made by Montgomery Mall Associates, L.P. in favor of KeyBank National Association, dated as of July 31, 2005. (26) First Amendment to Term Loan Agreement between KeyBank National Association and Montgomery Mall Associates Limited Partnership and Glimcher Properties Limited Partnership dated January 13, 2006. (30) Promissory Note dated as of September 1, 1998, issued by Morgantown Mall Associates Limited Partnership in the amount of fifty eight million three hundred fifty thousand dollars ($58,350,000). (4) Deed of Trust, Assignment of Leases and Rents and Security Agreement by Morgantown Mall Associates Limited Partnership to Michael B. Keller (Trustee) for the use and benefit of The Capital Company of America, LLC dated as of September 1, 1998. (4) Promissory Note dated as of November 1, 1998, issued by Glimcher Properties Limited Partnership in the amount of nineteen million dollars ($19,000,000) (relates to New Jersey Tax Exempt Bonds). (4) Deed of Trust and Security Agreement by Grand Central Limited Partnership for the benefit of Lehman Brothers Holdings Inc. dated as of January 21, 1999. (18) Promissory Note dated as of January 21, 1999, issued by Grand Central Limited Partnership in the amount of fifty two million five hundred thousand dollars ($52,500,000). (18) Loan Agreement, dated as of May 25, 2006, by and between WTM Glimcher, LLC and Morgan Stanley Credit Corporation (relates to Weberstown Mall). (19) Promissory Note A1, dated May 25, 2006, issued by WTM Glimcher, LLC in the principal amount of thirty million dollars ($30,000,000) (relates to Weberstown Mall) (19). Promissory Note A2, dated May 25, 2006, issued by WTM Glimcher, LLC in the principal amount of thirty million dollars ($30,000,000) (relates to Weberstown Mall). (19) Deed of Trust and Security Agreement, dated May 25, 2006, by and between WTM Glimcher, LLC, Chicago Title Insurance Company, and Morgan Stanley Credit Corporation (relates to Weberstown Mall). (19) Assignment of Leases and Rents, dated as of May 25, 2006, by and between WTM Glimcher, LLC and Morgan Stanley Credit Corporation (relates to Weberstown Mall). (19) Guaranty of Recourse Obligations, dated as of May 25, 2006, by Glimcher Properties Limited Partnership in favor of Morgan Stanley Credit Corporation (relates to Weberstown Mall). (19) 44 PROXY STATEMENT 10.37 10.38 10.39 10.40 10.41 10.42 10.43 10.44 10.45 10.46 10.47 10.48 10.49 10.50 10.51 10.52 10.53 10.54 10.55 10.56 10.57 10.58 10.59 10.60 Open-end Mortgage and Security Agreement by Mount Vernon Venture, LLC to Lehman Brothers Bank, FSB dated as of January 16, 2001. (6) Promissory Note dated as of January 16, 2001, issued by Mount Vernon Venture, LLC in the amount of nine million three hundred thousand dollars ($9,300,000). (6) Mortgage, Assignment of Leases and Rents, Security Agreement, and Fixture Filing by Glimcher Ashland Venture, LLC to KeyBank National Association dated as of October 15, 2001. (6) Promissory Note dated as of October 15, 2001 issued by Glimcher Ashland Venture, LLC in the amount of twenty seven million dollars ($27,000,000). (6) Amended and Restated Promissory Note 1 dated as of June 30, 2003 issued by LC Portland, LLC in the amount of seventy million dollars ($70,000,000.00). (21) Amended and Restated Promissory Note 2 dated June 30, 2003 issued by LC Portland, LLC in the amount of seventy million dollars ($70,000,000.00). (21) Agreement of Sale and Purchase and Joint Escrow Instructions, dated October 5, 2005, by and between Glimcher Properties Limited Partnership and Passco Colima, LLC, Passco PHM, LLC and PHM-1, LLC through PHM-29, LLC (relates to Puente Hills Mall acquisition). (30) Amendment to Agreement of Sale and Purchase and Joint Escrow Instructions, dated November 4, 2005, by and between Glimcher Properties Limited Partnership and Passco Colima, LLC, Passco PHM, LLC and PHM-1, LLC through PHM-29, LLC (relates to Puente Hills Mall acquisition). (30) Loan Assumption Agreement, dated as of December 29, 2005, between Passco Colima, LLC, Passco PHM, LLC and PHM-1, LLC through PHM-29, LLC, Puente Hills Mall, LLC and LaSalle Bank National Association, as Trustee for the Registered Holders of Greenwich Capital Commercial Funding Corp., Commercial Mortgage Trust 2003-C1, Commercial Mortgage Pass-Through Certificates, Series 2003-C1 (relates to Puente Hills Mall acquisition). (30) Guaranty of Recourse Obligations, dated as of December 29, 2005, by Glimcher Properties Limited Partnership in favor of LaSalle Bank National Association, as Trustee for the Registered Holders of Greenwich Capital Commercial Funding Corp., Commercial Mortgage Trust 2003-C1, Commercial Mortgage Pass-Through Certificates, Series 2003-C1 (relates to loan assumption for Puente Hills Mall acquisition). (30) Allonge to Promissory Note (relates to loan assumption for Puente Hills Mall acquisition). (30) Operating Agreement for OG Retail Holding Co., LLC, dated as of December 29, 2005 (pertains to joint venture between Glimcher Properties Limited Partnership and Oxford Properties Group). (30) Promissory Note A1 dated as of August 27, 2003, issued by Glimcher WestShore, LLC in the amount of sixty six million dollars ($66,000,000). (9) Promissory Note A2 dated as of August 27, 2003, issued by Glimcher WestShore, LLC in the amount of thirty four million dollars ($34,000,000). (9) Mortgage, Assignment of Leases and Rents and Security Agreement by Glimcher WestShore, LLC to Morgan Stanley Mortgage Capital Inc. dated as of August 27, 2003. (9) Guaranty of Recourse Obligations by Glimcher Properties Limited Partnership to Morgan Stanley Mortgage Capital, Inc. dated as of August 27, 2003, relating to WestShore Plaza Mall. (9) Note dated as of August 11, 1998 issued by Eastland Mall Limited Partnership to The Capital Company of America LLC in the amount of forty six million six hundred seventy three thousand two hundred twenty five dollars ($46,673,225). (9) Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of August 11, 1998 by Eastland Mall Limited Partnership to M. Jay Devaney, as Trustee, for the benefit of The Capital Company of America LLC. (9) Promissory Note dated as of October 1, 1997, issued by Catalina Partners, L.P. to Nomura Asset Capital Corporation in the amount of thirty six million ($36,000,000), relating to Colonial Park Mall. (9) Open-end Fee Mortgage, Leasehold Mortgage, Assignment of Rents, Security Agreement and Fixture Filing dated as of October 1, 1997 by Catalina Partners, L.P. to Nomura Asset Capital Corporation, relating to Colonial Park Mall. (9) Amended and Restated Credit Agreement, dated August 22, 2005, by and among Glimcher Properties Limited Partnership, KeyBank National Association and several other financial institutions. (27) Guaranty, dated August 22, 2005, by Glimcher Realty Trust and Glimcher Properties Corporation to and for the benefit of KeyBank National Association, individually and as administrative agent for itself and the lenders under the Amended and Restated Credit Agreement. (27) Form of Note. (27) Amended and Restated Credit Agreement, dated December 14, 2006, by and among Glimcher Properties Limited Partnership, KeyBank National Association, KeyBanc Capital Markets, and several other financial institutions (Replaces Exhibit 10.57). 45 PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 10.61 PRESIDENT’S LETTER 10.62 10.63 10.64 10.65 10.66 PROXY STATEMENT 10.67 10.68 10.69 10.70 10.71 10.72 10.73 FORM 10-K 10.74 10.75 10.76 10.77 10.78 10.79 10.80 CORPORATE INFORMATION 10.81 10.82 10.83 10.84 10.85 Guaranty, dated December 14, 2006, by Glimcher Realty Trust and Glimcher Properties Corporation to and for the benefit of KeyBank National Association, individually and as administrative agent for itself and the lenders under the Amended and Restated Credit Agreement (Replaces Exhibit 10.58). Form of Note. (included in Exhibit 10.60) Promissory Note A1, dated October 17, 2003, between MFC Beavercreek, LLC and KeyBank National Association in the amount of eighty-five million dollars ($85,000,000), relating to the Mall at Fairfield Commons in Beavercreek, Ohio. (13) Promissory Note A2, dated October 17, 2003, between MFC Beavercreek, LLC and KeyBank National Association in the amount of twenty-eight million five hundred thousand dollars ($28,500,000), relating to the Mall at Fairfield Commons in Beavercreek, Ohio. (13) Open End Mortgage, Assignment of Leases and Rents, Security Agreement, and Fixture Filing, dated October 17, 2003, between MFC Beavercreek, LLC and KeyBank National Association, relating to the Mall at Fairfield Commons in Beavercreek, Ohio. (13) Key Principal's Guaranty Agreement, dated October 17, 2003, between Glimcher Properties Limited Partnership and KeyBank National Association, relating to the loan on the Mall at Fairfield Commons in Beavercreek, Ohio. (13) Open End Mortgage, Assignment of Rents and Security Agreement, dated November 20, 2006, by EM Columbus II, LLC to Lehman Brothers Bank, FSB (relating to Eastland Ohio). Assignment of Leases and Rents, dated as of November 20, 2006, between EM Columbus II, LLC to Lehman Brothers Bank, FSB (relating to Eastland Ohio). Loan Agreement, dated November 20, 2006, by and between EM Columbus II, LLC, and Lehman Brothers Bank, FSB (relating to Eastland Ohio). Guaranty, dated November 20, 2006 by and between Glimcher Properties Limited Partnership to and for the benefit of Lehman Brothers Bank, FSB (relating to Eastland Ohio). Promissory Note, dated November 20, 2006 by EM Columbus II, LLC in favor of Lehman Brothers Bank, FSB in the principal amount of 43,000,000 (relating to Eastland Ohio). Promissory Note, dated as of July 15, 2005, issued by EM Columbus, LLC in the amount of Six Million Dollars ($6,000,000). (26). Unconditional Guaranty of Payment and Performance, dated July 15, 2005, by Glimcher Properties, L.P. to The Huntington National Bank. (26) Open-End Mortgage Modification of Mortgage and Note, dated July 15, 2005, by and between EM Columbus, LLC and The Huntington National Bank. (26) Unconditional Guaranty of Payment and Performance, dated July 15, 2005, by Glimcher Properties Limited Partnership to The Huntington National Bank. (26) Promissory Note, dated May 17, 2000, from Polaris Center, LLC to First Union National Bank, in the amount of $43,000,000, relating to the Polaris Towne Center existing debt. (13) Open-End Mortgage and Security Agreement, dated May 17, 2000, between Polaris Center, LLC and First Union National Bank, relating to Polaris Towne Center. (13) Amended and Restated Promissory Note A, between UBS Warburg Real Estate Investments Inc. and PFP Columbus, LLC, dated May 22, 2003, for $135,000,000, relating to the Polaris Fashion Place existing debt. (13) Amended and Restated Promissory Note B, between UBS Warburg Real Estate Investments Inc. and PFP Columbus, LLC, dated May 22, 2003, for $24,837,623 relating to the Polaris Fashion Place existing debt. (13) Mortgage Assignment of Leases and Rents and Security Agreement, dated April 1, 2003, from PFP Columbus, LLC to UBS Warburg Real Estate Investments Inc. relating to Polaris Fashion Place. (13) Loan Agreement, dated as of April 1, 2003, between PFP Columbus, LLC, as borrower, and UBS Warburg Real Estate Investments Inc., as lender. (13) Loan Agreement dated as of June 9, 2004 between N.J. METROMALL Urban Renewal, Inc., JG Elizabeth, LLC and Morgan Stanley Mortgage Capital Inc. relating to Jersey Gardens Mall in Elizabeth, New Jersey. (22) Promissory Note A1, dated June 9, 2004, between N.J. METROMALL Urban Renewal, Inc., JG Elizabeth, LLC and Morgan Stanley Mortgage Capital Inc. in the amount of $85,000,000, relating to Jersey Gardens Mall in Elizabeth, New Jersey. (22) Promissory Note A2, dated June 9, 2004, between N.J. METROMALL Urban Renewal, Inc., JG Elizabeth, LLC and Morgan Stanley Mortgage Capital Inc. in the amount of $80,000,000, relating to Jersey Gardens Mall in Elizabeth, New Jersey. (22) Fee and Leasehold Mortgage, Assignment of Leases and Rents and Security Agreement dated June 9, 2004 between N.J. METROMALL Urban Renewal Inc, JG Elizabeth, LLC and Morgan Stanley Mortgage Capital, Inc. relating to Jersey Gardens Mall in Elizabeth, New Jersey. (22) 46 10.86 10.87 10.88 10.89 10.90 10.91 10.92 10.93 10.94 10.95 10.96 10.97 10.98 10.99 10.100 10.101 10.102 10.103 10.104 10.105 10.106 10.107 10.108 10.109 Guaranty dated June 9, 2004, by Glimcher Properties Limited Partnership to Morgan Stanley Mortgage Capital Inc., relating to Jersey Gardens Mall in Elizabeth, New Jersey. (22) Loan Agreement, dated as of March 14, 2006, by and between Tulsa Promenade, LLC and Charter One Bank, N.A. (relating to Tulsa Promenade). (29) Promissory Note, dated March 14, 2006, issued by Tulsa Promenade, LLC to the order of Charter One Bank, N.A. in the principal amount of $50,000,000 (relating to Tulsa Promenade). (29) Mortgage with Power of Sale, Security Agreement and Financing Statement, made as of March 14, 2006, by Tulsa Promenade, LLC in favor of Charter One Bank, N.A. (relating to Tulsa Promenade). (29) Term Loan Agreement, dated January 13, 2006, between GM Olathe, LLC, Glimcher Properties Limited Partnership (as co-borrowers) and LLC and KeyBank National Association, relating to The Great Mall of the Great Plains in Olathe, Kansas. (30) Promissory Note, dated January 13, 2006, issued by GM Olathe, LLC and Glimcher Properties Limited Partnership (as co-borrowers) to the order of KeyBank National Association in the principal amount of $30,000,000, relating to The Great Mall of the Great Plains in Olathe, Kansas. (30) Amended and Restated Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated January 13, 2006, between Glimcher Properties Limited Partnership and GM Olathe in the amount of $30,000,000, relating to The Great Mall of the Great Plains in Olathe, Kansas. (30) Promissory Note, dated as of December 15, 2005, issued by RVM Glimcher, LLC to the order of Lehman Brothers Bank, FSB in the principal amount of $50,000,000, relating to River Valley Mall in Lancaster, Ohio. (30) Loan Agreement, dated as of December 15, 2005, between RVM Glimcher, LLC and Lehman Brothers Bank, FSB, relating to River Valley Mall in Lancaster, Ohio. (30) Open-End Mortgage and Security Agreement, dated December 15, 2005, between RVM Glimcher, LLC and Lehman Brothers Bank, FSB, relating to River Valley Mall in Lancaster, Ohio. (30) Assignment of Leases and Rents, dated as of December 15, 2005, between RVM Glimcher, LLC and Lehman Brothers Bank, FSB, relating to River Valley Mall in Lancaster, Ohio. (30) Guaranty of Recourse Obligations, dated as of December 15, 2005, by Glimcher Properties Limited Partnership to and for the benefit of Lehman Brothers Bank, FSB, relating to River Valley Mall in Lancaster, Ohio. (30) Agreement of Purchase and Sale, between Coyote Tulsa Mall, L.L.C. and Glimcher Properties Limited Partnership (relating to acquisition of Tulsa Promenade). (30) Employment & Consulting Agreement, dated January 20, 2005, between Herbert Glimcher, Glimcher Realty Trust and Glimcher Properties Limited Partnership. (14) Limited Liability Company Agreement of Kierland Crossing, LLC, dated as of May 12, 2006 (relating to joint venture between Glimcher Properties Limited Partnership and Vanguard City Home in Scottsdale, AZ). (19). Purchase Agreement and Escrow Instructions, dated May 12, 2006 by and between Kierland Crossing, LLC and Kierland Crossing Residential, LLC (relating to joint venture between Glimcher Properties Limited Partnership and Vanguard City Home in Scottsdale, AZ). (19) Ground Lease, dated as of May 12, 2006, by and between Sucia Scottsdale, LLC and Kierland Crossing, LLC (relating to joint venture between Glimcher Properties Limited Partnership and Vanguard City Home in Scottsdale, AZ). (19) First Amended and Restated Ground Lease, dated as of December 6, 2006, by and between Sucia Scottsdale, LLC and Kierland Crossing, LLC (relating to joint venture between Glimcher Properties Limited Partnership and Vanguard City Home in Scottsdale, AZ). Form Restricted Stock Award Agreement for Glimcher Realty Trust’s 2004 Incentive Compensation Plan (Extended Vesting). (31) Form Option Award Agreement for the Glimcher Realty Trust 2004 Incentive Compensation Plan (NonQualified Stock Options). (28) Form Option Award Agreement for the Glimcher Realty Trust 2004 Incentive Compensation Plan (Incentive Stock Options). (28) Form Restricted Stock Award Agreement for Glimcher Realty Trust’s 2004 Incentive Compensation Plan. (23) Form Option Award Agreement for the Glimcher Realty Trust 2004 Incentive Compensation Plan (NonQualified Stock Options/Grant Date Valuation). Form Option Award Agreement for the Glimcher Realty Trust 2004 Incentive Compensation Plan (Incentive Stock Options/Grant Date Valuation). PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 47 PRESIDENT’S LETTER 21.1 23.1 31.1 31.2 32.1 32.2 Subsidiaries of the Registrant Consent of Independent Registered Public Accounting Firm Certification of the Company’s CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of the Company’s CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Certification of the Company’s CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Certification of the Company’s CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Incorporated by reference to Glimcher Realty Trust’s Registration Statement No. 33-69740. Incorporated by reference to Glimcher Realty Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 1994, filed with the Securities and Exchange Commission on March 21, 1995. Incorporated by reference to Glimcher Realty Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 1997, filed with the Securities and Exchange Commission on March 31, 1998. Incorporated by reference to Glimcher Realty Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, filed with the Securities and Exchange Commission on March 30, 1999. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on July 11, 2005. Incorporated by reference to Glimcher Realty Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed with the Securities and Exchange Commission on March 16, 2002. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on September 8, 2006. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on August 29, 2003. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on September 8, 2003. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, with the Securities and Exchange Commission on February 25, 2004. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on August 31, 2004. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on September 2, 2004. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on January 20, 2004. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on January 24, 2005. Incorporated by reference to Glimcher Realty Trust’s Form 8-A, filed with the Securities and Exchange Commission on August 22, 2003. Incorporated by reference to Glimcher Realty Trust’s Form 8-A, filed with the Securities and Exchange Commission on February 20, 2004. Incorporated by reference to Appendix B of Glimcher Realty Trust’s Schedule 14A Proxy Statement, filed with the Securities and Exchange Commission on March 29, 2004. Incorporated by reference to Glimcher Realty Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 1999, filed with the Securities and Exchange Commission on May 14, 1999. Incorporated by reference to Glimcher Realty Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2006, filed with the Securities and Exchange Commission on July 28, 2006. Incorporated by reference to Glimcher Realty Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2002, filed with the Securities and Exchange Commission on August 13, 2002. Incorporated by reference to Glimcher Realty Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2003, filed with the Securities and Exchange Commission on August 12, 2003. Incorporated by reference to Glimcher Realty Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2004, filed with the Securities and Exchange Commission on August 13, 2004. Incorporated by reference to Glimcher Realty Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 2005, filed with the Securities and Exchange Commission on April 29, 2005. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on May 17, 2005. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on August 18, 2005. Incorporated by reference to Glimcher Realty Trust’s Quarterly Report on Form 10-Q for the period ended June 30, 2005, filed with the Securities and Exchange Commission on August 2, 2005. 48 (1) (2) (3) (4) PROXY STATEMENT (5) (6) (7) (8) (9) (10) (11) (12) FORM 10-K (13) (14) (15) (16) (17) (18) (19) CORPORATE INFORMATION (20) (21) (22) (23) (24) (25) (26) (27) (28) (29) (30) (31) Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on August 23, 2005. Incorporated by reference to Glimcher Realty Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 11, 2005. Incorporated by reference to Glimcher Realty Trust’s Quarterly Report on Form 10-Q for the period ended March 31, 2006, filed with the Securities and Exchange Commission on April 28, 2006. Incorporated by reference to Glimcher Realty Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the Securities and Exchange Commission on February 24, 2006. Incorporated by reference to Glimcher Realty Trust’s Form 8-K, filed with the Securities and Exchange Commission on May 9, 2006. PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 49 PRESIDENT’S LETTER 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. GLIMCHER REALTY TRUST /s/ Mark E. Yale Mark E. Yale Executive Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) February 21, 2007 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been executed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE /s/ Michael P. Glimcher Michael P. Glimcher TITLE President, Chief Executive Officer and Trustee (Principal Executive Officer) Executive Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) Chairman of the Board and Trustee DATE February 21, 2007 PROXY STATEMENT /s/ Mark E. Yale Mark E. Yale February 21, 2007 /s/ Herbert Glimcher Herbert Glimcher FORM 10-K February 21, 2007 /s/ David M. Aronowitz David M. Aronowitz /s/ Philip G. Barach Philip G. Barach /s/ Wayne S. Doran Wayne S. Doran /s/ Howard Gross Howard Gross /s/ Niles C. Overly Niles C. Overly /s/ Alan R. Weiler Alan R. Weiler /s/ William S. Williams William S. Williams Member, Board of Trustees February 21, 2007 Member, Board of Trustees February 21, 2007 Member, Board of Trustees February 21, 2007 Member, Board of Trustees February 21, 2007 CORPORATE INFORMATION Member, Board of Trustees February 21, 2007 Member, Board of Trustees February 21, 2007 Member, Board of Trustees February 21, 2007 50 PRESIDENT’S LETTER Report of the Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders Glimcher Realty Trust Columbus, Ohio We have audited the accompanying consolidated balance sheets of Glimcher Realty Trust as of December 31, 2006 and 2005 and the related consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2006. We have also audited the schedule listed in Item 15(a) 2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule 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 and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule, assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. 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 financial position of Glimcher Realty Trust at December 31, 2006 and 2005, and the results of its operations and cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Glimcher Realty Trust’s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 20, 2007 expressed an unqualified opinion thereon. /s/ BDO Seidman, LLP Chicago, Illinois February 20, 2007 PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 51 PRESIDENT’S LETTER GLIMCHER REALTY TRUST CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and par value amounts) ASSETS 2006 December 31, 2005 $ 291,998 1,869,381 50,235 2,211,614 470,397 1,741,217 18,863 72,731 44,248 1,877,059 7,821 4,162 15,410 49,877 8,665 32,318 $1,995,312 PROXY STATEMENT Investment in real estate: Land…………………………………………………………………. $ 247,149 Buildings, improvements and equipment……………………….…... 1,679,935 Developments in progress…………………………………………... 49,803 1,976,887 Less accumulated depreciation……………………………………... 483,115 Property and equipment, net…………………………………….. 1,493,772 Deferred costs, net…………………………………………………. 17,316 Real estate assets held-for-sale……………………………………… 192,301 Investment in and advances to unconsolidated real estate entities… 70,416 Investment in real estate, net…………………………………….. 1,773,805 11,751 Cash and cash equivalents……………………………………………… Non-real estate assets associated with discontinued operations………... 12,662 Restricted cash………………………………………………………….. 12,132 Tenant accounts receivable, net………………………………………… 40,233 Deferred expenses, net………………………………………………….. 8,134 Prepaid and other assets………………………………………………… 30,103 Total assets………………………………………….. $ 1,888,820 LIABILITIES AND SHAREHOLDERS’ EQUITY Mortgage notes payable………………………………………………… Mortgage notes payable associated with properties held-for-sale……… Notes payable…………………………………………………………… Other liabilities associated with discontinued operations………………. Accounts payable and accrued expenses……………………………….. Distributions payable……………………………………………….…... Total liabilities………………………………………. Minority interest in operating partnership………………………………. $1,203,100 101,786 272,000 3,926 57,520 23,481 1,661,813 1,772 $1,299,193 52,288 150,000 1,374 66,264 23,410 1,592,529 15,729 FORM 10-K CORPORATE INFORMATION Shareholders’ equity: Series F Cumulative Preferred Shares of Beneficial Interest, $0.01 par value, 2,400,000 shares issued and outstanding ……………… 60,000 Series G Cumulative Preferred Shares of Beneficial Interest, $0.01 par value, 6,000,000 shares issued and outstanding ……………… 150,000 Common Shares of Beneficial Interest, $0.01 par value, 36,776,365 and 36,506,448 shares issued and outstanding as of December 31, 2006 and December 31, 2005, respectively………………………. 368 Additional paid-in capital……………………………………….…... 547,036 Distributions in excess of accumulated earnings……………………. (532,141) Accumulated other comprehensive loss……………………….……. (28 ) Total shareholder’s equity………….………………. 225,235 Total liabilities and shareholder’s equity…………... $ 1,888,820 60,000 150,000 365 543,639 (366,924) (26) 387,054 $1,995,312 The accompanying notes are an integral part of these consolidated financial statements 52 GLIMCHER REALTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (dollars in thousands, except per share amounts) For the Years Ended December 31, 2006 2005 2004 Revenues: Minimum rents…………………………………………………... $189,729 5,848 Percentage rents………………………………………………….. Tenant reimbursements………………………….……….……… 87,025 Other……………………………………………………………... 26,662 Total revenues………………………………………………... 309,264 Expenses: Property operating expenses……………………….………….…. 63,364 Real estate taxes…………………………………………………. 33,835 97,199 Provision for doubtful accounts…………………………………. 3,733 Other operating expenses…………………………………….….. 9,624 Depreciation and amortization……………………………….….. 72,965 General and administrative………………………………………. 15,313 Impairment losses – real estate asset... ………………………….. 46,688 Total expenses…………………………………………….….. 245,522 Operating income…………………………………………….. 63,742 $186,429 5,556 85,189 22,852 300,026 61,252 34,123 95,375 3,808 8,968 67,466 18,415 194,032 105,994 269 74,396 51 31,918 252 31,666 (16,393) 1,619 3,958 20,850 17,437 $ 3,413 $177,395 5,349 82,200 23,895 288,839 61,898 31,841 93,739 4,315 7,881 64,994 14,347 185,276 103,563 187 78,359 3 25,394 2,906 22,488 19,646 9,621 51,755 17,517 4,878 $ 29,360 PRESIDENT’S LETTER PROXY STATEMENT Interest income………………………………………………………. 465 Interest expense……………………………………………………… 84,985 Equity in income of unconsolidated entities, net….………………… 1,443 (Loss) income before minority interest in operating partnership and discontinued operations……………...…………………………... (19,335) Minority interest in operating partnership……………...……………. (7,733 ) (Loss) income from continuing operations…………………….……. (11,602) Discontinued operations: Impairment losses – real estate assets…………………………… (65,230) Gain on sales of properties, net.…………………….……...……. 1,717 (Loss) income from operations …………………….……………. (2,050) Net (loss) income………………………………………..……. (77,165) Less: Preferred stock dividends………………………………...…… 17,437 Less: Issuance costs related to preferred stock redemption…………. Net (loss) income available to common shareholders ...……. $ (94,602 ) Earnings (loss) Per Common Share (“EPS”): Basic: Continuing operations…………………………………………….…. $ Discontinued operations…………………………………………..…. $ Net (loss) income…………………….…………………………….... $ Diluted: Continuing operations………………………………………………. $ Discontinued operations…………………………………………….. $ Net (loss) income…...……………………………………………….. $ Weighted average common shares outstanding……………………... Weighted average common shares and common share equivalent outstanding………………………………………………………… FORM 10-K (0.93 ) (1.65 ) (2.58 ) (0.93 ) (1.65 ) (2.58 ) 36,611 39,646 $ $ $ $ $ $ 0.37 (0.27 ) 0.09 0.36 (0.27 ) 0.09 36,036 39,856 $ $ $ $ $ $ 0.08 0.75 0.83 CORPORATE INFORMATION 0.08 0.74 0.82 35,456 39,496 Cash distributions declared per common share of beneficial interest.. $ 1.9232 Net (loss) income……………………………………………………. $ (77,165 ) Other comprehensive (loss) income on derivative instruments, net… (2 ) Comprehensive (loss) income……………………………………….. $ (77,167 ) $ 1.9232 $ 20,850 9 $ 20,859 $ 1.9232 $ 51,755 1,192 $ 52,947 The accompanying notes are an integral part of these consolidated financial statements 53 CORPORATE INFORMATION FORM 10-K PROXY STATEMENT PRESIDENT’S LETTER GLIMCHER REALTY TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY For the Years Ended December 31, 2006, 2005 and 2004 (dollars in thousands, except share, par value and unit amounts) Series B Convertible Preferred Shares Common Shares of Beneficial Interest Shares Amount Total $441,939 (68,380) 570 8,757 2,366 144,802 (4,878) (17,517) 51,755 1,192 _______ 21,954 386,384 358,586 56,666 4 3 1 560 6,531 9,656 (1) 314 (17,437) 20,850 9 _______ _______ 60,000 ________ 150,000 __________ 36,506,448 ______ 365 297 (8,004) 543,639 ________ (366,924) (70,615) 17,855 87,298 119,766 44,998 1 2 457 1,629 3,104 560 (17,437) (77,165) (2) ___ ____ $ __ _____ $ 60,000 ________ $ 150,000 _________ 36,776,365 ______ $ 368 348 (2,701) $ 547,036 ________ $ (532,141) ______ $ (28) ______ (26) _______ 60,000 ________ 150,000 _________ 35,682,858 ____ _ 357 237 6,051 534,286 ________ (300,786) (69,551) ______ (35) (127,950) (17,517) 51,755 1,192 237 6,051 443,822 (69,551) 560 6,535 9,659 314 (17,437) 20,850 9 297 (8,004 ) 387,054 (70,615) 457 1,630 3,106 560 (17,437) (77,165) (2) 348 (2,701) $ 225,235 35,066,112 (68,380) 23,658 503,882 89,206 150,000 (127,950 ) 4,878 (5,198) 1 5 1 569 8,752 2,365 $ 350 $516,632 $(261,766) $(1,227) Additional Paid-in Capital $ 127,950 $ 60,000 $ Series F Cumulative Preferred Shares Series G Cumulative Preferred Shares Distributions In Excess of Accumulated Earnings Accumulated Other Comprehensive Income/(Loss) Balance, December 31, 2003………………………………. Distributions declared, $1.9232 per share………………..… Distribution Reinvestment and Share Purchase Plan….…… Exercise of stock options…………………………………… OP unit conversion……………………………………….… Issuance of Series G cumulative redeemable preferred shares of beneficial interest……………………………….. Redemption of Series B cumulative redeemable preferred shares of beneficial interest……………………………….. Preferred stock dividends…………………………………... Net income…………………………………………………. Other comprehensive income on derivative instruments…... Stock offering expense……………………………………... Transfer from minority interest in partnership……………... Balance, December 31, 2004………………………………. Distributions declared, $1.9232 per share………………….. Distribution Reinvestment and Share Purchase Plan…….… Exercise of stock options…………………………………… OP unit conversion…………………………………………. Restricted stock grant………………………………………. Amortization of stock incentive program…………………... Preferred stock dividends…………………………………... Net income…………………………………………………. Other comprehensive income on derivative instruments…... Stock offering expense…………………………….……….. Transfer to minority interest in partnership…………...…… Balance, December 31, 2005…………………………….... Distributions declared, $1.9232 per share………………….. Distribution Reinvestment and Share Purchase Plan………. Exercise of stock options…………………………………… OP unit conversion…………………………………………. Restricted stock grant, net of cancellations……...…………. Amortization of stock incentive program…………………... Preferred stock dividends…………………………………... Net loss…...………………………………………………… Other comprehensive loss on derivative instruments………. Stock offering expense……………………………………... Transfer to minority interest in partnership………………... Balance, December 31, 2006…………………………….… The accompanying notes are an integral part of these consolidated financial statements. 54 PRESIDENT’S LETTER GLIMCHER REALTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) For the Years Ended December 31, Cash flows from operating activities: 2006 2005 2004 Net (loss) income……………………………………………..……………………. $ (77,165) $ 20,850 $ 51,755 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Provision for doubtful accounts…………………………………………….……. 6,696 5,097 6,241 Depreciation and amortization………………………….…………………….…. 75,481 77,815 79,185 Loan fee amortization………………………………….………………………. 2,819 2,662 4,383 Equity in income of unconsolidated entities…………….……………………... (1,443) (51) (3) Capitalized development costs charged to expense….…………………………... 367 257 125 Minority interest in operating partnership…………….…………………………. (7,733) 252 2,906 Return of minority interest share of earnings…………...……………………….. (252) (2,906) Gain on sales of properties from discontinued operations………………….…… (1,717) (1,619) (19,646) Impairment losses – real estate assets……..……………………………….…… 111,918 16,393 Gain on sales of outparcels…………………………….…….……………..……. (3,895) (517) (813) Stock compensation expense……………………………………………………. 908 664 237 Net changes in operating assets and liabilities: Tenant accounts receivable, net……………………………....……………...…... (1,383) (5,722) (2,498) Prepaid and other assets…………………………………………………………. 1,144 (7,182) (4,423) Accounts payable and accrued expenses….……………………………………... (9,767) (302) (12,238) Net cash provided by operating activities………………...………………. Cash flows from investing activities: Additions to investment in real estate………………………….…………….….... Acquisitions of properties………………………………………………………... Contribution from joint venture partner……………………….…………….…… Investment in unconsolidated entities….…………………………………………. Proceeds from sales of properties.………………………………………………... Proceeds from sales of outparcels……………………………….…………….…. Withdrawals from restricted cash……….………………………….…………….. Additions to deferred expenses and other………………………….……………... Net cash (used in) provided by investing activities.……………………. Cash flows from financing activities: Proceeds from (payments to) revolving line of credit, net….…………………….. Additions to deferred financing costs……………………………………………... Proceeds from issuance of mortgages and other notes payable………….………... Principal payments on mortgages and other notes payable...…………………….. Loss on early extinguishment of debt…………………….……………………….. Proceeds from issuance of Preferred Stock – Series G, net of underwriting and other offering costs of $5,198………………………….……... Redemption Preferred Shares, Series B………………………….………………... Exercise of stock options and other……………………………………………….. Cash distributions……………………….………………………….……………... Net cash provided by (used in) financing activities………………………. Net change in cash and cash equivalents…………………………………………... Cash and cash equivalents, at beginning of period………………………………… Cash and cash equivalents, at end of period……………………………………….. 96,230 (77,128) (55,715) 11,257 (13,266) 24,690 6,770 266 (5,785) (108,911) 122,000 (2,511) 168,331 (179,497) 2,087 (93,799) 16,611 3,930 7,821 $ 11,751 $ 108,345 (95,880) (44,248) 23,624 2,975 101 (6,775) (120,203) 76,000 (2,259) 111,669 (88,364) 7,095 (92,908) 11,233 (625) 8,446 7,821 $ 102,305 (72,726) 106,834 2,713 5,326 (4,014) 38,133 (6,800) (1,896) 231,500 (303,400) 557 144,802 (127,950) 9,327 (89,172) (143,032) (2,594) 11,040 8,446 PROXY STATEMENT FORM 10-K CORPORATE INFORMATION The accompanying notes are an integral part of these consolidated financial statements. 55 PRESIDENT’S LETTER GLIMCHER REALTY TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except share and unit amounts) 1. Organization and Basis of Presentation Organization Glimcher Realty Trust is a fully-integrated, self-administered and self-managed, Maryland real estate investment trust (“REIT”), which owns, leases, manages and develops a portfolio of retail properties (the “Property” or “Properties”) consisting of enclosed regional and super regional malls (“Malls”) and community shopping centers (“Community Centers”). At December 31, 2006, the Company owned and operated a total of 30 Properties consisting of 26 Malls (24 wholly-owned and 2 partially owned through a joint venture) and 4 Community Centers. The “Company” refers to Glimcher Realty Trust and Glimcher Properties Limited Partnership, a Delaware limited partnership, as well as entities in which the Company has an interest, collectively. Basis of Presentation The consolidated financial statements include the accounts of Glimcher Realty Trust (“GRT”), Glimcher Properties Limited Partnership (the “Operating Partnership,” “OP” or “GPLP”) and Glimcher Development Corporation (“GDC”). As of December 31, 2006, GRT was a limited partner in GPLP with a 91.9% ownership interest and GRT’s wholly owned subsidiary, Glimcher Properties Corporation (“GPC”), was GPLP’s sole general partner, with a 0.5% interest in GPLP. GDC, a wholly-owned subsidiary of GPLP, provides development, construction, leasing and legal services to the Company’s affiliates and is a taxable REIT subsidiary. The equity method of accounting is applied to entities in which the Company does not have controlling direct or indirect voting interest, but can exercise influence over the entity with respect to its operations and major decisions. These entities are reflected on the Company’s consolidated financial statements as “Investments in unconsolidated real estate entities.” All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements. 2. Summary of Significant Accounting Policies FORM 10-K PROXY STATEMENT Revenue Recognition Minimum rents are recognized on an accrual basis over the terms of the related leases on a straight-line basis. Percentage rents, which are based on tenants’ sales as reported to the Company, are recognized once the sales reported by such tenants exceed any applicable breakpoints as specified in the tenants’ leases. The percentage rents are recognized based upon the measurement dates specified in the leases that indicate when the percentage rent is due. Recoveries from tenants for real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period that the applicable costs are incurred. The Company recognizes differences between estimated recoveries and the final billed amounts in the subsequent year. Other revenues primarily consist of fee income which relates to property management services and is recognized in the period in which the service is performed, licensing agreement revenues which are recognized as earned and the proceeds from sales of development land which are generally recognized at the closing date. CORPORATE INFORMATION Tenant Accounts Receivable The allowance for doubtful accounts reflects the Company’s estimate of the amounts of the recorded accounts receivable at the balance sheet date that will not be recovered from cash receipts in subsequent periods. The Company’s policy is to record a periodic provision for doubtful accounts based on total revenues. The Company also periodically reviews specific tenant balances and determines whether an additional allowance is necessary. In recording such a provision, the Company considers a tenant’s creditworthiness, ability to pay, probability of collections and the retail sector in which the tenant operates. The allowance for doubtful accounts is reviewed periodically based upon the Company’s historical experience. 56 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) Investment in Real Estate – Carrying Value of Assets The Company maintains a diverse portfolio of real estate assets. The portfolio holdings have increased as a result of both acquisitions and the development of new Properties and have been reduced by selected sales of assets. The amounts to be capitalized as a result of acquisitions and developments and the periods over which the assets are depreciated or amortized are determined based on the application of accounting standards that may require estimates as to fair value and the allocation of various costs to the individual assets. The Company allocates the cost of the acquisition based upon the estimated fair value of the net assets acquired. The Company also estimates the fair value of intangibles related to its acquisitions. The valuation of the fair value of the intangibles involves estimates related to market conditions, probability of lease renewals and the current market value of in-place leases. This market value is determined by considering factors such as the tenant’s industry, location within the Property and competition in the specific market in which the Property operates. Differences in the amount attributed to the intangible assets can be significant based upon the assumptions made in calculating these estimates. Depreciation and Amortization Depreciation expense is computed using a straight-line method and estimated useful lives for buildings and improvements using a weighted average composite life of forty years and equipment and fixtures of five to ten years. Expenditures for leasehold improvements and construction allowances paid to tenants are capitalized and amortized over the initial term of each lease. Cash allowances paid to retailers that are used for purposes other than improvements to the real estate are amortized as a reduction to minimum rents over the initial lease term. Maintenance and repairs are charged to expense as incurred. Cash allowances paid in return for operating covenants from retailers who own their real estate are capitalized as contract intangibles. These intangibles are amortized over the period the retailer is required to operate its store. Investment in Real Estate – Impairment evaluation Management evaluates the recoverability of its investment in real estate assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that recoverability of the asset is not assured. The Company evaluates the recoverability of its investments in real estate assets to be held and used each quarter and records an impairment charge when there is an indicator of impairment and the undiscounted projected future cash flows are less than the carrying amount for a particular Property. The estimated cash flows used for the impairment analysis and the determination of estimated fair value are based on the Company’s plans for the respective assets and the Company’s views of market and economic conditions. The estimates consider matters such as current and historical rental rates, occupancies for the respective Properties and comparable properties and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in the Company’s plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, could be substantial. The Company recognized a $46,688 non-cash impairment charge on The Great Mall of the Great Plains Property during the fourth quarter of 2006. Even though The Company has no current intentions to sell the Property, the Company is working on multiple redevelopment opportunities that may involve a substantial reconfiguration of the Property. These plans result in more than temporary declines in future cash flow shortfalls when compared to the carrying value of approximately $89.4 million. The Company estimated the fair value of the asset by utilizing the average of several different valuation methods. PROXY STATEMENT FORM 10-K CORPORATE INFORMATION 57 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) Sale of Real Estate Assets The Company recognizes property sales in accordance with SFAS No. 66, “Accounting for Sales of Real Estate.” The Company generally records the sales of operating properties and outparcels using the full accrual method at closing when the earnings process is deemed to be complete. Sales not qualifying for full recognition at the time of sale are accounted for under other appropriate deferral methods. Investment in Real Estate – Held-for-Sale The Company evaluates the held-for-sale classification of its real estate each quarter. Assets that are classified as held-for-sale are recorded at the lower of their carrying amount or fair value less cost to sell. Assets are generally classified as held-for-sale once management commits to a plan to sell the properties and has initiated an active program to market them for sale. The results of operations of these real estate properties are reflected as discontinued operations in all periods reported. On occasion, the Company will receive unsolicited offers from third parties to buy individual Company properties. Under these circumstances, the Company will classify the particular property as held-for-sale when a sales contract is executed with no contingencies and the prospective buyer has funds at risk to ensure performance. Accounting for Acquisitions The fair value of the real estate acquired is allocated to acquired tangible assets, consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases, the value of tenant relationships, and the value of in-place leases based in each case on their fair values. Purchase accounting is applied to assets and liabilities related to real estate entities acquired based upon the percentage of interest acquired. FORM 10-K PROXY STATEMENT The fair value of the tangible assets of an acquired property (which includes land, building and tenant improvements) is determined by valuing the property as if it were vacant, based on management’s determination of the relative fair values of these assets. Management determines the as-if-vacant fair value of a property using methods to determine the replacement cost of the tangible assets. In determining the fair value of the identified intangible assets and liabilities of an acquired property, abovemarket and below-market in-place lease values are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease. The capitalized above-market lease values and the capitalized below-market lease values are amortized as an adjustment to rental income over the initial lease term. The aggregate value of in-place leases is determined by evaluating various factors, including an estimate of carrying costs during the expected lease-up periods, current market conditions and similar leases. In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses and estimates of lost rental revenue during the expected lease-up periods based on current market demand. Management also estimates costs to execute similar leases including leasing commissions, legal and other related costs. The value assigned to this intangible asset is amortized over the remaining lease term plus an assumed renewal period that is reasonably assured. The aggregate value of other acquired intangible assets include tenant relationships. Factors considered by management in assigning a value to these relationships include: assumptions of probability of lease renewals, investment in tenant improvements, leasing commissions and an approximate time lapse in rental income while a new tenant is located. The value assigned to this intangible asset is amortized over the average life of the relationship. 58 CORPORATE INFORMATION PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) Deferred Costs The Company capitalizes initial direct costs in accordance with SFAS No. 91, “Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases,” and amortizes these costs over the initial lease term. The costs are capitalized upon the execution of the lease and the amortization period begins the earlier of the store opening date or the date the tenant’s lease obligation begins. Stock-Based Compensation Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), which expands and clarifies SFAS No. 123 “Accounting for Stock-Based Compensation”. In January 2003, the Company adopted the fair value recognition provisions of SFAS No. 123 as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” prospectively to all awards granted, modified or settled on or after January 1, 2003. Accordingly, the Company recognized as compensation expense the fair value of all awards granted after January 1, 2003. SFAS No. 123(R) requires companies to measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. The cost is expensed over the requisite service period (usually the vesting period) beginning the first quarter of 2006 for awards issued after June 15, 2005. Stock compensation expense exclusive of restricted stock was $348, $350 and $237 for the years ended December 31, 2006, 2005 and 2004 respectively. Had compensation cost for the plans been determined based on the fair value at the grant dates for grants under these plans consistent with SFAS No. 123 (R) prior to January 1, 2003, the Company’s net income available to common shareholders would have decreased $0, $4 and $39 for the years ended December 31, 2006, 2005 and 2004, respectively. Earnings per share diluted would have remained unchanged as a result of this stock compensation expense for 2006, 2005 and 2004. Cash and Cash Equivalents PROXY STATEMENT FORM 10-K For purposes of the statements of cash flows, all highly liquid investments purchased with original maturities of three months or less are considered to be cash equivalents. At December 31, 2006 and 2005, cash and cash equivalents primarily consisted of overnight purchases of debt securities. The carrying amounts approximate fair value. Restricted Cash Restricted cash consists primarily of cash held for real estate taxes, insurance, property reserves for maintenance and expansion or leasehold improvements as required by certain of the loan agreements. Deferred Expenses Deferred expenses consist principally of financing fees. These costs are amortized as interest expense over the terms of the respective agreements. Deferred expenses in the accompanying consolidated balance sheets are shown net of accumulated amortization. CORPORATE INFORMATION Derivative Instruments and Hedging Activities The Company recognizes all derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. Changes in the fair value of derivative financial instruments that qualify for hedge accounting are recorded in stockholders’ equity as a component of comprehensive income or as an adjustment to the carrying value of the hedged item. Changes in fair values of derivatives not qualifying for hedge accounting are reported in earnings. 59 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income and reclassified into interest income or interest expense in the same period or periods during which the hedged item affects interest income or interest expense. The remaining gain or loss of the derivative instruments in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is ineffective and is recognized in other income/other expense during the period of change. Upon termination of a derivative instrument prior to maturity, the aforementioned adjustment to accumulated other comprehensive income is amortized/accreted into interest income or interest expense over the remaining term of the hedge relationship using the effective interest method. Should the hedged item be sold, mature or extinguished prior to the end of the hedge relationship or a forecasted transaction is probable of not occurring, the aforementioned amounts in accumulated other comprehensive income are reclassified to interest income or interest expense and the derivative instrument’s change in fair value from that point forward will be recorded in other income or other expense. Interest Costs The components of the Company’s interest costs related to its continuing operations are shown in the table below. Interest expense and loan fees are recorded consistent with the terms of the Company’s financing arrangements. Capitalized interest is recorded as a reduction to interest expense based upon the Company’s weighted average borrowing rate. Year Ended December 31, 2006 2005 2004 Interest expense……………………………………………… $ 82,946 $ 72,296 $ 74,326 Amortization of loan fees …………………………………… 2,039 2,100 4,033 Total interest expense………………………………………... 84,985 74,396 78,359 Interest capitalized…………………………………………… 2,844 2,270 597 Total interest costs ………………………………………….. $ 87,829 $ 76,666 $ 78,956 Investment in Unconsolidated Real Estate Entities The Company evaluates all joint venture arrangements for consolidation. The percentage interest in the joint venture, evaluation of control and whether a variable interest entity (“VIE”) exists are all considered in determining if the arrangement qualifies for consolidation. The Company accounts for its investments in unconsolidated real estate entities using the equity method of accounting, whereby the cost of an investment is adjusted for the Company’s share of equity in net income or loss from the date of acquisition and reduced by distributions received. The income or loss of each investee is allocated in accordance with the provisions of the applicable operating agreements. The allocation provisions in these agreements may differ from the ownership interest held by each investor. Differences between the carrying amount of the Company’s investment in the respective investees and the Company’s share of the underlying equity of such unconsolidated entities are amortized over the respective lives of the underlying assets as applicable. The Company periodically reviews its investment in unconsolidated real estate entities for other than temporary declines in market value. Any decline that is not expected to be recovered in the next twelve months is considered other than temporary and an impairment charge is recorded as a reduction in the carrying value of the investment. CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 60 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) Advertising Costs The Company promotes its Properties on behalf of its tenants through various media. Advertising is expensed as incurred and the majority of the advertising expense is recovered from the tenants through lease obligations. Net advertising expense was $303, $487, and $422 for the years ended December 31, 2006, 2005 and 2004, respectively. Income Taxes GRT files as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”). In order to qualify as a REIT, GRT is required to distribute at least 90.0% of its ordinary taxable income to shareholders and to meet certain asset and income tests as well as certain other requirements. GRT will generally not be liable for federal income taxes, provided it satisfies the necessary distribution requirements and maintains its REIT status. Even as a qualified REIT, the Company is subject to certain state and local taxes on its income and property. The Company’s subsidiary, GDC, has elected taxable REIT subsidiary status under Section 856(l) of the Code. GPLP wholly owns GDC. For federal income tax purposes, GDC is treated as a separate entity and taxed as a regular C-Corporation. In accordance with SFAS No. 109 “Accounting for Income Taxes,” deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carryforwards of GDC. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Minority Interests Minority interests represent the aggregate partnership interest in the Operating Partnership held by the Operating Partnership limited partner unit holders (the “Unit Holders”). Income allocated to minority interest is based on the Unit Holders ownership percentage of the Operating Partnership. The ownership percentage is determined by dividing the numbers of Operating Partnership Units (“OP Units”) held by the Unit Holders by the total OP Units outstanding. The issuance of additional shares of beneficial interest (the “Common Shares”, “Shares” or “Share”) or OP Units changes the percentage ownership of both the Unit Holders and the Company. Since an OP unit is generally redeemable for cash or Shares at the option of the Company, it is deemed to be equivalent to a Share. Therefore, such transactions are treated as capital transactions and result in an allocation between shareholders’ equity and minority interest in the accompanying balance sheets to account for the change in the ownership of the underlying equity in the Operating Partnership. Supplemental Disclosure of Non-Cash Financing and Investing Activities As a result of the Company’s acquisitions of joint venture interests not previously owned, the Company had non-cash debt assumptions and issued OP Units. The debt assumed was $193,190 for the year ended December 31, 2004. In January 2004, the Company issued 594,342 new OP Units with an approximate value of $13,564 in connection with the acquisition of the remaining joint venture interest in Polaris Fashion Place, an approximately 1.6 million square foot upscale regional mall in Columbus, Ohio (“Polaris”). Non-cash transactions resulting from other accounts payable and accrued expenses for ongoing operations such as real estate improvements and other assets were $13,645 and $13,815 as of December 31, 2006 and 2005, respectively. Share distributions of $17,682 and $17,552 and Operating Partnership distributions of $1,440 and $1,498 had been declared but not paid as of December 31, 2006 and December 31, 2005, respectively. 8.75% Series F Cumulative Preferred Shares of Beneficial Interest (“Series F Preferred Shares”) distributions of $1,313 had been declared but not paid as of December 31, 2006 and 2005. 8.125% Series G Cumulative Preferred Shares of Beneficial Interest (“Series 61 PROXY STATEMENT FORM 10-K CORPORATE INFORMATION PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) G Preferred Shares”) distributions of $3,046 had been declared but not paid as of December 31, 2006 and December 31, 2005. Amounts paid for interest, exclusive of capitalized interest were $97,924, $88,937 and $89,864 in 2006, 2005 and 2004, respectively. Comprehensive Income SFAS No. 130, “Reporting Comprehensive Income,” establishes guidelines for the reporting and display of comprehensive income and its components in financial statements. Comprehensive income includes net income and all other non-owner charges in shareholder’s equity during a period including unrealized gains and losses from value adjustments on certain derivative instruments. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. New Accounting Pronouncements In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” While this standard does not establish any new requirements for reporting assets or liabilities at fair value, it does clarify the definition of “fair value” when used in FASB pronouncements. This standard is effective no later than for fiscal years beginning after November 15, 2007. The Company does not anticipate a material impact to the Company’s financial position and results of operations. In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes; an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” It requires a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, in an income tax return. This Interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company will be required to adopt this interpretation in the first quarter of fiscal year 2007. While the Company is currently evaluating the provisions of FIN 48, the adoption is not expected to have a material impact on its financial position and results of operations. Reclassifications CORPORATE INFORMATION FORM 10-K PROXY STATEMENT Certain reclassifications of prior period amounts, including the presentation of the statements of operations required by SFAS No. 144, have been made in the financial statements to conform to the 2006 presentation. 62 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) 3. Real Estate Assets Held-for-Sale SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less costs to sell. At December 31, 2005, eight of the Company’s Properties were classified as held-for-sale. During 2006, the Company sold seven of these Properties and committed to a plan to sell four additional Properties, resulting in five assets heldfor-sale at December 31, 2006. In addition to classifying these properties as held-for-sale, the financial results, including any impairment charges of these properties, are reported as discontinued operations in the Statement of Operations and the net book value of the assets are reflected as held-for-sale on the balance sheet. The table below provides information on our held-for-sale assets. For the Years Ended December 31, 2005 2006 Number of Properties sold……………………………………………….. 7 6 Number of Properties held-for-sale……………………………………… 5 8 Real estate assets held-for-sale………………………………….……….. $192,301 $ 72,731 Mortgage notes payable associated with properties held-for-sale……….. $101,786 $ 52,288 PROXY STATEMENT 4. Tenant Accounts Receivable The Company’s accounts receivable is comprised of the following components. Accounts Receivable – Assets Held-For-Investment Billed Receivables…………………………….………... Straight-line Receivables……………………………….. Unbilled Receivables …………………………………... Less: Allowance for Doubtful Accounts………………... Net Accounts Receivable……………………………….. Accounts Receivable – Assets Held-For-Sale Billed Receivables…………………………….………... Straight-line Receivables……………………………….. Unbilled Receivables …………………………………... Less: Allowance for Doubtful Accounts………………... Net Accounts Receivable……………………………….. December 31, 2006 $14,333 22,132 9,553 (5,785) $40,233 December 31, 2006 $6,429 2,279 1,142 (2,613) $7,237 December 31, 2005 $20,736 25,496 11,881 (8,236) $49,877 December 31, 2005 $2,125 694 526 (439) $2,906 FORM 10-K CORPORATE INFORMATION 63 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) 5. Mortgage Notes Payable as of December 31, 2006 and December 31, 2005 consist of the following: Description/Borrower Fixed Rate: SAN Mall, LP (p) Colonial Park Mall, LP Mount Vernon Venture, LLC Charlotte Eastland Mall, LLC (p) Morgantown Mall Associates, LP GM Olathe, LLC Grand Central, LP Johnson City Venture, LLC Polaris Center, LLC Glimcher Ashland Venture, LLC Dayton Mall Venture, LLC Glimcher WestShore, LLC PFP Columbus, LLC LC Portland, LLC JG Elizabeth, LLC MFC Beavercreek, LLC Glimcher SuperMall Venture, LLC RVM Glimcher, LLC WTM Glimcher, LLC EM Columbus II, LLC Tax Exempt Bonds Variable Rate/Bridge: Montgomery Mall Associates, LP (p) Other: Fair value adjustment – Polaris Center, LLC Extinguished debt Total Mortgage Notes Payable: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) (r) Carrying amount of Mortgage Notes Payable Interest Rate Interest Payment Terms Terms Payment at Maturity Maturity Date 2006 $ 33,020 32,451 8,753 43,766 52,474 30,000 47,815 38,787 40,482 24,809 55,886 95,255 142,129 133,256 158,791 109,232 59,515 50,000 60,000 43,000 19,000 1,278,421 25,000 25,000 2005 $ 33,523 32,975 8,865 44,559 53,381 (q) 48,572 39,214 40,953 25,307 56,717 96,804 144,439 135,326 161,371 110,871 60,341 50,000 (q) (q) 19,000 1,162,218 25,000 25,000 2006 8.35% 7.73% 7.41% 7.84% 6.89% 6.35% 7.18% 8.37% 8.20% 7.25% 8.27% 5.09% 5.24% 5.42% 4.83% 5.45% 7.54% 5.65% 5.90% 5.87% 6.00% 2005 8.35% 7.73% 7.41% 7.84% 6.89% (q) 7.18% 8.37% 8.20% 7.25% 8.27% 5.09% 5.24% 5.42% 4.83% 5.45% 7.54% 5.65% (q) (q) 6.00% (o) (o) (o) (o) (l) (o) (o) (o) (o) (a) (a) (a) (a) (a) (b) (a) (a) (a) (a) (a) (a) (a) (a) (a) (a) (a) (c) (b) (d) (e) $ 32,615 $ 32,033 $ 8,624 $ 42,302 $ 50,823 $ 30,000 $ 46,065 $ 37,026 $ 38,543 $ 21,817 $ 49,864 $ 84,824 $ 124,572 $ 116,922 $ 135,194 $ 92,762 $ 49,969 $ 44,931 $ 60,000 $ 38,057 $ 19,000 (f) (f) Feb. 11, 2008 (g) (g) Jan. 12, 2009 Feb. 1, 2009 June 1, 2010 (h) Nov. 1, 2011 (i) Sept. 9, 2012 April 11, 2013 (j) June 8, 2014 Nov. 1, 2014 (k) Jan. 11, 2016 June 8, 2016 Dec. 11, 2016 Nov. 1, 2028 FORM 10-K PROXY STATEMENT 7.03% 6.16% (m) (b)(r) $ 25,000 Jan. 31, 2007 1,465 $1,304,886 1,894 162,369 $1,351,481 (n) The loan requires monthly payments of principal and interest. The loan requires monthly payments of interest only. The loan requires monthly payments of interest only until February 2009, thereafter principal and interest are required. The loan requires monthly payments of interest only until December 2008, thereafter principal and interest are required. The loan requires semi-annual payments of interest. The loan matures in October 2027, with an optional prepayment (without penalty) date on October 11, 2007. The loan matures in September 2028, with an optional prepayment (without penalty) date on September 11, 2008. The loan matures in June 2030, with an optional prepayment (without penalty) date on June 1, 2010. The loan matures in July 2027, with an optional prepayment (without penalty) date on July 11, 2012. The loan matures in June 2033, with an optional prepayment (without penalty) date on June 11, 2013. The loan matures in September 2029, with an optional prepayment (without penalty) date on February 11, 2015. Interest rate of LIBOR plus 165 basis points fixed through a SWAP agreement at a rate of 6.35%. Interest rate of LIBOR plus 165 basis points. Interest rate ranging from 6.37% to 7.43% at December 31, 2005. Interest rate escalates after optional prepayment date. Mortgage notes payable associated with properties held-for-sale. Mortgage was refinanced in 2006 and amount included in extinguished debt. Mortgage repaid on January 22, 2007. CORPORATE INFORMATION 64 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) All mortgage notes payable are collateralized by certain Properties owned by the respective entities with net book values of $1,444,186 and $1,684,178 at December 31, 2006 and 2005, respectively. Certain of the loans contain financial covenants regarding minimum net operating income and coverage ratios. Management believes the Company is in compliance with all covenants at December 31, 2006. Additionally, certain of the loans have cross-default provisions and are cross-collateralized with mortgages on the Properties owned by the borrowers SAN Mall, LP and Morgantown Mall Associates, LP. Under such cross-default provisions, a default under any mortgage included in a cross-defaulted loan may constitute a default under all such mortgages under that loan and may lead to acceleration of the indebtedness due on each Property within the collateral pool. Additionally, $55,000 of mortgage notes payable relating to certain Properties have been guaranteed by GPLP as of December 31, 2006. Principal maturities (excluding extension options) on mortgage notes payable during the five years subsequent to December 31, 2006, are as follows: $107,239 in 2007; $118,618 in 2008; $92,957 in 2009; $92,741 in 2010; $39,324 in 2011; $852,542 matures thereafter. 6. Notes Payable In December 2006, the Company closed on a $470,000 amended credit facility (the “Amended Credit Facility”) that matures in December 2009 and has a one-year extension option available to the Company, subject to the satisfaction of certain conditions. The Amended Credit Facility is unsecured and amends a $300,000 unsecured credit facility that was due to expire in August 2008 (the “Prior Facility”). The Amended Credit Facility is expandable to $600,000, provided there is no default under the Amended Credit Facility and that one or more participating lenders agrees to increase their funding commitment or one or more new participating lenders is added to the facility. The interest rate ranges from LIBOR plus 0.95% to LIBOR plus 1.40% depending upon the Company’s ratio of debt to total asset value. The Amended Credit Facility contains customary covenants, representations, warranties and events of default, including maintenance of a specified minimum net worth requirement; a total debt to total asset value ratio; a secured debt to total asset value ratio; an interest coverage ratio; and a fixed charge coverage ratio. Management believes the Company is in compliance with all covenants as of December 31, 2006. At December 31, 2006, the outstanding balance on the Amended Credit Facility was $272,000. Additionally, $20,150 represents a holdback on the available balance for letters of credit issued under the Amended Credit Facility. As of December 31, 2006, the unused balance of the Amended Credit Facility available to the Company was $177,850 and the interest rate was 6.40%. At December 31, 2005, the outstanding balance on the Prior Facility was $150,000. Additionally, $5,070 represented a holdback on the available balance for letters of credit issued under the Prior Facility at December 31, 2005. As of December 31, 2005, the unused balance of the Prior Facility available to the Company was $144,930 and the interest rate was 5.54%. 7. Income taxes PROXY STATEMENT FORM 10-K The following table reconciles the Company’s net income to taxable income for the years ended December 31, 2006, 2005 and 2004: 2006 2005 2004 Net (loss) income……………………………………………………. $(77,165) $20,850 $51,755 Add: Net loss of taxable REIT subsidiaries………………………... 1,163 2,501 1,696 Net (loss) income from REIT operations (1)………………………. (76,002) 23,351 53,451 Add: Book depreciation and amortization…………………………. 71,923 73,622 75,817 Less: Tax depreciation and amortization……….………………….. (57,573) (56,847) (59,207) Book loss (gain) from capital transactions and impairments………. 99,687 13,083 (18,087) Tax (loss) gain from capital transactions…………………………... (4,079) (14,624) 6,736 Other book/tax differences, net…………………………………….. (1,037) (1,408 ) (14,436) Taxable income before adjustments…………………………………. 32,919 37,177 44,274 Less: Capital gains…………………………………………………. (196) (1,614) (6,736) Adjusted taxable income subject to 90% requirement………………. $ 32,723 $35,563 $37,538 (1) Adjustments to “Net (loss) income from REIT operations” are net of amounts attributable to minority interest and taxable REIT subsidiaries. CORPORATE INFORMATION 65 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) Reconciliation between cash dividends paid and dividends paid deduction: The following table reconciles cash dividends paid with the dividends paid deduction for the years ended December 31, 2006, 2005 and 2004: 2006 $87,922 (21,912) 22,041 (55,132) $32,919 2005 $86,593 (21,516) 21,912 (49,812) $37,177 2004 $85,511 (21,131) 21,516 (41,622) $44,274 Cash dividends paid……………………………….………………... Less: Dividends designated to prior year…………………………. Plus: Dividends designated from following year…………………. Less: Portion designated return of capital………………………… Dividends paid deduction…………………………………………… PROXY STATEMENT Characterization of distributions: The following table characterizes distributions paid per common share for the years 2006, 2005 and 2004: 2006 2005 Amount % Amount % Ordinary income……………………………. $0.4191 21.79% $0.5221 27.15% Return of capital……………………………. 1.5016 78.08 1.3774 71.62 Capital gains………………………………... Unrecaptured Section 1250 gain……………. 0.0025 0.13 0.0237 1.23 $1.9232 100.00% $1.9232 100.00% ended December 31, 2004 Amount % $0.6380 33.18% 1.1707 60.87 0.1145 5.95 $1.9232 100.00% The following table characterizes distributions paid per Series B Preferred Share for the year ended December 31, 2004 (redeemed in 2004): 2004 Amount % Ordinary income………………………………………………………………………………… $0.3104 84.79% Return of capital…………………………………………………….…………………………… Capital gains……………………………….……………………………………………………. Unrecaptured Section 1250 gain………………………………………………………………… 0.0557 15.21 $0.3661 100.00% The following table characterizes distributions paid per Series F Preferred Share for the years ended December 31, 2006, 2005 and 2004: 2006 2005 2004 Amount % Amount % Amount % 99.40% $2.0926 95.66% $1.8548 84.79% Ordinary income……………………………. $2.1746 Return of capital……………………………. Capital gains………………………………... Unrecaptured Section 1250 gain……………. 0.0130 0.60 0.0950 4.34 0.3328 15.21 $2.1876 100.00% $2.1876 100.00% $2.1876 100.00% The following table characterizes distributions paid per Series G Preferred Share for the years ended December 31, 2006, 2005 and 2004: 2006 2005 2004 Amount % Amount % Amount % Ordinary income……………………………. $2.0191 99.40% $1.9430 95.66% $1.4687 84.79% Return of capital……………………………. Capital gains………………………………... Unrecaptured Section 1250 gain……………. 0.0121 0.60 0.0882 4.34 0.2635 15.21 $2.0312 100.00% $2.0312 100.00% $1.7322 100.00% 66 CORPORATE INFORMATION FORM 10-K PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities of GDC. Deferred tax assets (liabilities) include the following : Deferred tax assets (liabilities): 2006 Investment in partnership………………………………… Capitalized development costs…………………………… Depreciation and amortization….………………………… Charitable contributions…………………………………. Accrued bonuses…………………………………………. Interest expense….…………….………………………… Other…………………………………….………………. Net operating losses……………………………………… Net deferred tax asset .…………………………………… Valuation allowance……………………………………… Net deferred tax asset after valuation allowance…………. 16 (719 ) 24 22 295 1,424 8 2,045 3,115 (3,115 ) $ $ 2005 (5 ) (412 ) 41 22 756 8 2,322 2,732 (2,732 ) $ $ $ 2004 (1) (198) 36 22 248 (3) 1,957 2,061 (2,061 ) $ - PROXY STATEMENT The gross tax loss carryforwards total $5,111, and $2,037, $355, $144, $479, $623, $561 and $912, and will expire in 2018, 2020, 2021, 2022, 2023, 2024 and 2025, respectively. The income tax provision consisted of $5, $2 and $12 in 2006, 2005 and 2004, respectively, related to current state and local taxes. Net deferred tax expense for each of the years was $0. The income tax expense reflected in consolidated statements of operations differs from the amount determined by applying the federal statutory rate of 34% to the income before taxes of the Company’s taxable REIT subsidiaries as a result of state income taxes and the utilization of tax loss carryforwards of $277, $0 and $0 in 2006, 2005 and 2004, respectively. A full valuation allowance had previously been provided against the tax loss carryforwards utilized. FORM 10-K In 2006, the Company continued to maintain a valuation allowance for the Company’s net deferred tax assets, which consisted primarily of tax loss carryforwards. The valuation allowance was determined in accordance with the provisions of SFAS No. 109 “Accounting for Income Taxes” which requires the recording of a valuation allowance when it is more likely than not that any or all of the deferred tax assets will not be realized. In absence of favorable factors, application of SFAS No. 109 requires a 100% valuation allowance for any net deferred tax assets when a company has cumulative financial accounting losses, excluding unusual items, over several years. The Company’s cumulative loss represented negative evidence sufficient to require a full valuation allowance under the provisions of SFAS No. 109. The Company intends to maintain a full valuation allowance for its net deferred tax asset until sufficient positive evidence exists to support reversal of the reserve. Until such time, except for minor state and local tax provisions, the Company will have no reported tax provision, net of valuation allowance adjustments. 8. Preferred Shares GRT’s Declaration of Trust authorizes GRT to issue up to an aggregate 100,000,000 shares of GRT, consisting of common shares and/or one or more series of preferred shares of beneficial interest. On November 17, 1997, GRT completed a $120,000 public offering of 4,800,000 shares of 9.25% Series B Cumulative Preferred Shares of Beneficial Interest (the “Series B Preferred Shares”). On November 25, 1997, GRT sold an additional 318,000 Series B Preferred Shares as a result of the underwriters exercising the over-allotment option granted to them. Aggregate net proceeds of the offering were $123,072. Distributions on the Series B Preferred Shares were payable quarterly in arrears and the Company was able to redeem the Series B Preferred Shares anytime on or after November 15, 2003, at a redemption price of $25.00 per share, plus accrued and unpaid distributions. On February 27, 2004, the Company redeemed 5,118,000 of the Series B Preferred Shares. Shareholders of record at the CORPORATE INFORMATION 67 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) close of business on February 27, 2004 received a redemption price of $25.00 per share plus an amount equal to the dividends accrued and unpaid. The total cost to redeem the shares was $129,824. The redemption of the Series B Preferred Shares resulted in a $4,878 non-cash charge as required under EITF Topic Number D-42, “The Effect on the Calculation of Earnings Per Share for the Redemption or Induced Conversion of Preferred Stock.” This one time non-cash charge represents costs that were incurred and recorded in “Additional Paid In Capital” at the time of the initial issuance of the Series B Preferred Shares in 1997. On March 9, 1999, the Board of Trustees adopted a Preferred Share Purchase Plan (the “Plan”) pursuant to which a distribution will be made of one preferred share purchase right (a “Right”) for each outstanding Common Share. The distribution was made on March 22, 1999, to the shareholders of record at the close of business on that date. These rights trade with our Common Shares. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a Series E Junior Participating Preferred Share of the Company, par value $0.01 per share (the “Preferred Shares”), at a price of $55.00 per one one-hundredth of a Preferred Share (the “Purchase Price”), subject to adjustment. The Rights will become exercisable in the event that any person or group acquires or announces its intention to acquire beneficial ownership of 15.0% or more of the outstanding common shares of the Company (an “Acquiring Person”). Alternatively, each Right holder, except the Acquiring Person, will have the right to receive upon exercise that number of common shares having a market value of two times the Purchase Price of the Right. At any time before any person or group becomes an Acquiring Person, the Board of Trustees may redeem the Rights at a price of $0.01 per Right at which time the ability to exercise the Rights will terminate. At any time after a person or group becomes an Acquiring Person, the Board of Trustees may exchange the Rights at an exchange ratio of one common share or one Preferred Share per Right. The Plan expires on March 9, 2009. On August 25, 2003, the Company completed a $60,000 public offering of 2,400,000 shares of Series F Preferred Shares, par value $0.01 per share, at a purchase price of $25.00 per Series F Preferred Share. Aggregate net proceeds of the offering were $58,110. Distributions on the Series F Preferred Shares are payable quarterly in arrears. The Company generally may redeem the Series F Preferred Shares anytime on or after August 25, 2008, at a redemption price of $25.00 per share, plus accrued and unpaid distributions. On February 23, 2004, the Company completed a $150,000 public offering of 6,000,000 shares of Series G Preferred Shares. Aggregate net proceeds of the offering were $145,300. Distributions on the Series G Preferred Shares are payable quarterly in arrears beginning on April 15, 2004. The Company generally may redeem the Series G Preferred Shares anytime on or after February 23, 2009, at a redemption price of $25.00 per share, plus accrued and unpaid distributions. The proceeds were used to redeem the Series B Preferred Shares on February 27, 2004 and to pay down $16,900 of the Company’s credit facility. 9. Derivative Financial Instruments FORM 10-K PROXY STATEMENT The Company accounts for its derivatives and hedging activities under SFAS No. 133 as amended by SFAS No. 138 and 149. During the year ended December 31, 2006, the Company recognized additional other comprehensive loss of $2 to adjust the carrying amount of the interest rate swaps to fair values at December 31, 2006, net of $(163) in reclassifications to earnings for interest rate swap settlements and interest rate cap amortization during the period. During the twelve months ended December 31, 2005, the Company recognized additional other comprehensive income of $9 to adjust the carrying amount of the interest rate swaps and caps to fair values at December 31, 2005, net of $11 in reclassifications to earnings for interest rate swap settlements and interest rate cap amortization during the period and $1 in minority interest participation. During the year ended December 31, 2004, the Company recognized additional other comprehensive income of $1,192 to adjust the carrying amount of the interest rate swaps and caps to fair values at December 31, 2004, net of $1,325 in reclassifications to earnings for interest rate swap settlements and interest rate cap amortization during the period and $100 in minority interest participation. The interest rate swap settlements were offset by a corresponding reduction in interest expense related to the interest payments being hedged. 68 CORPORATE INFORMATION PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) The Company may be exposed to the risk associated with variability of interest rates that might impact the cash flows and the results of operations of the Company. Our hedging strategy, therefore, is to eliminate or reduce, to the extent possible, the volatility of cash flows. The following table summarizes the notional values and fair values of the Company’s derivative financial instruments as of December 31, 2006. The notional values provide an indication of the extent of the Company’s involvement in these instruments at that time, but do not represent exposure to credit, interest rate or market risks. Interest Notional Value Rate Maturity Fair Value Hedge Type Swap – Cash Flow .............................. Swap – Cash Flow…………………… Swap – Cash Flow…………………… $ 30,000 $ 35,000 $ 35,000 4.7025% 5.2285% 5.2285% January 15, 2008 August 15, 2008 August 15, 2008 $154 $(85) $(85) PROXY STATEMENT On December 31, 2006, the derivative instruments were reported at their fair value of $(16) in accounts payable and accrued expenses in the accompanying balance sheet, with a corresponding adjustment to other comprehensive income for the unrealized gains and losses (net of minority interest participation). Over time, the unrealized gains and losses held in accumulated other comprehensive income will be reclassified to earnings, of which $0 is expected to be reclassified in 2007. This reclassification will correlate with the recognition of the hedged interest payments in earnings. There was no hedge ineffectiveness during the year ended December 31, 2006. To determine the fair values of derivative instruments, the Company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. Standard market conventions and techniques such as undiscounted cash flow analysis, replacement cost and termination cost are used to determine fair value. 10. Rentals Under Operating Leases FORM 10-K The Company receives rental income from the leasing of retail shopping center space under operating leases with expiration dates through the year 2027. The minimum future base rentals under non-cancelable operating leases as of December 31, 2006 are as follows: 2007………………………………. 2008………………………………. 2009………………………………. 2010………………………………. 2011………………………………. Thereafter.………………………… $ 199,125 179,797 152,957 125,903 100,170 303,375 $1,061,327 Minimum future base rentals do not include amounts which may be received from certain tenants based upon a percentage of their gross sales or as reimbursement of real estate taxes and property operating expenses. Minimum rents contain straight-line adjustments for rental revenue increases which aggregated $(1,487), $578 and $614 for the years ended December 31, 2006, 2005 and 2004, respectively. In 2006, 2005 and 2004, no tenant collectively accounted for more than 10.0% of rental income. The tenant base includes national, regional and local retailers, and consequently the credit risk is concentrated in the retail industry. CORPORATE INFORMATION 69 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) 11. Investment in Unconsolidated Entities Investment in unconsolidated real estate entities as of December 31, 2006 consists of our investment in three separate venture arrangements. The Company evaluated each of its three venture arrangements individually and determined that control was shared between the Company and its venture partner. Therefore, the ventures do not qualify as VIE’s. The Company concluded that its venture arrangements would be accounted for under the equity method of accounting. The description of the three ventures are specified below. o ORC Venture Investment in unconsolidated real estate entities as of December 31, 2006 consisted of a 52% interest held by GPLP in a joint venture with an affiliate of Oxford Properties Group (“Oxford”), which is the global real estate platform for the Ontario (Canada) Municipal Employees Retirement System, a Canadian pension plan. On December 29, 2005, the ORC Venture acquired Puente Hills Mall (“Puente”), an enclosed regional mall consisting of approximately 1.2 million square feet of GLA located in the Los Angeles metro area from an independent third party. The purchase price of $170,080 was funded in part by the assumption of an $88,800 non-recourse mortgage loan and pro rata contributions to the ORC Venture by GPLP and Oxford. On March 14, 2006, GPLP transferred all of its ownership interest in Tulsa Promenade (“Tulsa”), an enclosed regional mall located in Tulsa, Oklahoma, to the ORC Venture for total consideration of $58,300 (which included the ORC Venture’s assumption of a $35,000 mortgage loan). o Surprise Venture Investment in unconsolidated real estate entities as of December 31, 2006 consisted of a 50% interest held by a GPLP subsidiary in a joint venture (the “Surprise Venture”) formed on September 6, 2006 with the former landowner of the property that is to be developed. The Surprise Venture will develop approximately 27,000 square feet of retail space on a five-acre site located in an area northwest of Phoenix, Arizona. In September 2006, the Company invested $1.9 million in the Surprise Venture. o Scottsdale Venture Investment in unconsolidated real estate entities as of December 31, 2006 consisted of a 50% interest held by a GPLP subsidiary in a joint venture (the “Scottsdale Venture”) formed in May 2006 with an affiliate of The Wolff Company (“Wolff”). The purpose of the venture is to build the Scottsdale Crossing development, an approximately 650,000 square foot premium retail and office complex to be developed in Scottsdale, Arizona. In December of 2006 the Company invested approximately $10.3 million in the Scottsdale Venture. The Company may provide management, development, construction, leasing and legal services for a fee to each of the ventures described above. Each individual agreement specifies which services the Company provides. The Company recognized fee income of $1,866, $632 and $14 for these services for the year ended December 31, 2006, 2005 and 2004, respectively. The net income for each venture is allocated in accordance with the provisions of the applicable joint venture agreement. The summary statement of operations and balance sheet for the Company’s investment in its joint venture arrangements for the years ended December 31, 2006 and December 31, 2005 are presented below: CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 70 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) For the Year Ended December 31, 2006 Company’s Pro-Rata Share of Joint Total Venture Operations Statements of Operations Total revenues………………………………………………... Operating expenses…………………………………………… Depreciation and amortization……………………………….. Operating income….………………………………….……... Other expenses, net…………………………………………… Interest expense, net………………………………………….. Net income…………………………………………….……… Preferred dividend……………………………………………. Net income available to the Company’s joint ventures………. $ 33,957 15,552 8,901 9,504 40 6,665 2,799 23 $ 2,776 $ 17,658 8,087 4,629 4,942 21 3,466 1,455 12 $ 1,443 PROXY STATEMENT The $51 in net income for the year ended December 31, 2005 represents the Company’s share of income for Puente for the period December 29, 2005 through December 31, 2005. The $3 in net income for the year ended December 31, 2004 represents our share of income for the period January 1, 2004 through January 4, 2004 for both Polaris Mall, LLC and Polaris Center, LLC. These two entities were fully consolidated on January 5, 2004. BALANCE SHEETS Assets: Investment properties at cost, net………………………...… Intangible assets (1)………………………………………… Other assets………………………………………………… Liabilities and Members’ Equity: Mortgage notes payable……………………………………. Intangibles (2)…………………………………………….... Other liabilities……………………………………………... Members’ equity……………………………………………. Total liabilities and members’ equity………………………. GPLP’s share of members’ equity……………………………. December 31, 2006 $ 236,744 12,855 28,559 $ 278,158 $ 122,099 13,634 4,827 140,560 137,598 $ 278,158 $ 70,793 December 31, 2005 $ 171,897 11,478 4,616 $ 187,991 $ 88,212 14,360 324 102,896 85,095 $ 187,991 $ 44,200 FORM 10-K Reconciliation of Members’ Equity to Company Investment in Unconsolidated Entities: Members’ equity……………………………………………... $ 70,793 $ 44,200 Advances and additional costs……………………………….. (377) 48 Investment in unconsolidated entities………………………... $ 70,416 $ 44,248 CORPORATE INFORMATION (1) Includes value of acquired in-place leases. (2) Includes the net value of $566 and $410 for above-market acquired leases as of December 31, 2006 and 2005, respectively, and $14,200 and $14,770 for below-market acquired leases as of December 31, 2006 and 2005, respectively. 71 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) 12. Related Party Transactions Employment & Consulting Agreement of Herbert Glimcher On January 20, 2005, Herbert Glimcher resigned as Chief Executive Officer of the Company and entered into an Employment and Consulting Agreement (the “Employment Agreement”) with GRT. He remains Chairman of the Board of Trustees (“Board”) of GRT. Under the Employment Agreement, GRT employs Herbert Glimcher as Senior Advisor and as non-executive Chairman of the Board. He also serves as non-executive Chairman of the Board of Directors for GPC. Neither GRT nor GPC considers Herbert Glimcher to be an executive officer. The initial term of the Employment Agreement commenced on February 1, 2005 and continued through May 31, 2006 (the “Term”); provided, that the Term was subject to renewal for an additional one year period if GRT and Herbert Glimcher agreed to renew the Term prior to its expiration. On March 9, 2006, GRT and Herbert Glimcher agreed to renew the Employment Agreement for an additional one-year period to end on May 31, 2007. Herbert Glimcher receives $100 per annum for serving as the non-executive Chairman of the Board for GRT and GPC and $250 per annum for serving as Senior Advisor to GRT (the “Salary”). Additionally, he shall receive a total of $2,000 in cash during a period of two years following the termination of his employment under the Employment Agreement (the “Post-Employment Restricted Period”) from GRT. GRT recognized $2,000 in compensation expense during the first quarter of 2005 related to the Employment Agreement. The Salary costs are reflected in the general and administrative expenses for the Company for the related period. GRT reimburses Herbert Glimcher for reasonable rent for office space located in Columbus, Ohio, the reasonable salary of one administrative assistant and provides a part-time driver. The Company also maintains a life insurance policy covering the life of Herbert Glimcher. For the years ended December 31, 2006 and 2005, the aggregate total of reimbursements paid by GRT under the Employment Agreement was $119 and $123, respectively. FORM 10-K PROXY STATEMENT Corporate Flight Inc. The Company paid Corporate Flight, Inc. (“CFI”), which is wholly owned by Herbert Glimcher, the following amounts for the use in connection with Company related matters, of an airplane owned by CFI. For the Years Ended : December 31, 2006……………………….. December 31, 2005……………………….. December 31, 2004……………………….. Total ………………………………….. Archer-Meek-Weiler Insurance Agency Corporate Flight Inc. $ 360 304 239 $ 903 CORPORATE INFORMATION The Company has engaged Archer-Meek-Weiler, a company of which Alan R. Weiler, a Trustee, is Chairman, as its agent for the purpose of obtaining property, liability, directors and officers, and employment practices insurance coverage. In connection with securing such insurance coverage, Archer-Meek-Weiler received net commissions and fees of $343, $284 and $300 for the years ended December 31, 2006, 2005 and 2004, respectively. The stock of Archer-Meek-Weiler is owned by a trust for the benefit of Alan R. Weiler’s children and the children of his brother, Robert J. Weiler. Polaris Transactions On January 5, 2004, GPLP completed the acquisition of the joint venture interests not previously owned by the Company in Polaris Mall, LLC, the indirect owner of Polaris, from NP Limited Partnership (“NPLP”), an Ohio 72 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) limited partnership, and other parties. As part of the transaction, the Company acquired in fiscal year 2004 the remaining 60.7% interest in Polaris Mall, LLC for approximately $46,500, which was paid with approximately $33,000 in cash and the balance by the issuance of 594,342 OP Units in GPLP valued at approximately $13,500. On January 5, 2004, GPLP also completed the acquisition of the joint venture interests not previously owned by the Company in Polaris Center, LLC, the owner of Polaris Towne Center, a 443,165 square foot town center located in Columbus, Ohio, from NPLP. As part of the transaction, the Company acquired in fiscal year 2004 the remaining 50% interest in Polaris Center, LLC for approximately $10,000, which was paid in cash. Mr. Weiler, his spouse and children own, in its entirety, WSS Limited Partnership, an Ohio limited partnership (“WSS”). WSS directly owns OP Units of limited partnership in GPLP. WSS also indirectly owns OP Units by virtue of its ownership interest in NPLP. WSS also owns an interest in Star-Weiler Limited Partnership, an Ohio limited partnership (“Star-Weiler”). Star-Weiler owns an interest in NPLP. Mr. Weiler’s children, nieces and nephews also indirectly own an interest in NPLP. In addition, Mr. Weiler’s sister-in-law previously owned an interest in Polaris Mall, LLC, which interest was acquired by GPLP on January 5, 2004. Following the acquisition of the joint venture interests not previously owned by the Company in Polaris Mall, LLC and Polaris Center, LLC, NPLP and WSS converted the OP Units to Common Shares. Leasing Activity A brother of Herbert Glimcher owns a company that currently leases four store locations in the Company’s Properties. Two leases were terminated during 2006. Minimum Rents were $227, $266 and $268 for the years ended December 31, 2006, 2005 and 2004, respectively. 13. Commitments and Contingencies PROXY STATEMENT FORM 10-K The Operating Partnership leases office space under an operating lease that had an initial term of four years commencing on July 2003. Future minimum rental payments as of December 31, 2006 are as follows: Office Lease 2007…………………………………………………. $ 436 2008…………………………………………………. 36 2009…………………………………………………. 2010…………………………………………………. Thereafter……………………………………….…… $ 472 Office rental expenses (including miscellaneous month-to-month lease rentals) for the years ended December 31, 2006, 2005 and 2004 were $418, $446 and $416, respectively. CORPORATE INFORMATION At December 31, 2006, there were 3.0 million OP Units outstanding. These OP Units are redeemable, at the option of the holders, beginning on the first anniversary of their issuance. The redemption price for an OP Unit shall be, at the option of GPLP, payable in the following form and amount: (a) cash at a price equal to the fair market value of one Common Share of GRT or (b) one Common Shares for each OP Unit. The fair value of the OP Units outstanding at December 31, 2006 is $80,645 based upon a per unit value of $26.92 at December 31, 2006, (based upon a five-day average of the Common Stock price from December 21, 2006 to December 28, 2006). In July 1998, the New Jersey Economic Development Authority issued approximately $140,500 of Economic Development Bonds. On May 29, 2002, the New Jersey Economic Development Authority refunded certain of the Economic Development Bonds issued in 1998 and issued approximately $108,940 of replacement Economic Development Bonds. The Company began making quarterly Payment In Lieu of Taxes (“PILOT”) payments 73 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) commencing May 2001 and terminating on the date of the final payment of the bonds. Such PILOT payments are treated as real estate tax expense in the statements of operations. The amount of the annual PILOT payments beginning with the bond year ended April 1, 2001 was $8,925 and increases 10.0% every five years until the final payment is made. The Company has provided a limited guarantee of franchise tax payments to be received by the city until franchise tax payments achieve $5,600 annually; any such payments made by the Company are subject to refund from future franchise tax payments. Through December 31, 2006, the Company has made $12,770 in payments under this agreement. The Company has reserved $475 in relation to a contingency associated with the sale of Loyal Plaza, a community center sold in 2002, relating to environmental assessment and monitoring matters. PROXY STATEMENT The Company is involved in lawsuits, claims and proceedings, which arise in the ordinary course of business. The Company is not presently involved in any material litigation. In accordance with SFAS No. 5, “Accounting for Contingencies,” the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Although the outcome of any litigation is uncertain, the Company does not expect any such legal actions to have a material adverse effect on the Company’s consolidated financial condition or results of operations taken as a whole. 14. Restricted Common Stock FORM 10-K Shares of restricted common stock are granted pursuant to GRT’s 2004 Incentive Compensation Plan. Shares issued for the year ended December 31, 2005 vest in one-third installments over a period of three years commencing on the one-year anniversary of the grant date for the recipient’s award. Shares issued for the year ended December 31, 2006 vest in one-third installments, over a period of five years beginning on the third annual anniversary of the grant date. The restricted common stock value is determined by the Company’s share price on the grant date. As restricted stock represents an incentive for future periods, the Company recognizes the related compensation expense ratably over the applicable vesting periods. For the year ended December 31, 2006, 58,332 shares of restricted common stock were granted. For the year ended December 31, 2005, 56,666 shares of restricted common stock were granted. The related compensation expense recorded for the year ended December 31, 2006 and 2005 was $560 and $314, respectively. The amount of unvested restricted shares that will be expensed in future periods was $1,695 and $1,069 for the years ended December 31, 2006 and 2005, respectively. A summary of the activity of the Company’s restricted common stock for the year ended December 31, 2006 is presented below. Weighted Average Grant Date Fair Value $ 24.407 $ 26.100 $ 24.375 $ 25.227 $ 25.454 CORPORATE INFORMATION Activity for the year ended December 31, 2006 Outstanding at beginning of year…………………. Shares granted…………………………………….. Shares vested……………………………………… Shares forfeited…………………………………… Shares outstanding at end of year…………………. 15. Share Option Plans Restricted Shares 56,666 58,332 (17,219) (13,334) 84,445 GRT has established the 1993 Employee Share Option Plan (the “1993 Employee Plan”), the 1993 Trustee Share Option Plan (the “1993 Trustee Plan”), the 1997 Incentive Plan (the “Incentive Plan”) and the 2004 Incentive Compensation Plan (“2004 Plan”) for the purpose of attracting and retaining the Company’s trustees, executive and 74 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) other employees (the 1993 Employee Plan, the 1993 Trustee Plan, the Incentive Plan and the 2004 Plan are collectively referred to as the “Plans”). There are no options that remain outstanding under the 1993 Employee Plan, 264,848 options remain outstanding and exercisable under the 1993 Trustee Plan; 1,206,470 outstanding under the 1997 Plan of which 1,097,654 are exercisable; and 660,814 outstanding under the 2004 Plan of which 179,168 are exercisable. A summary of the status of the Company's Plans at December 31, 2006, 2005 and 2004 and changes during the years ending on those dates is presented below. 2006 2005 2004 WeightedWeightedWeightedAverage Average Average Exercise Exercise Exercise Price Options Price Options Price Options Option Plans: Outstanding at beginning of year……………….. Granted………………………………………….. Exercised………………………………………… Forfeited…………………………………………. Outstanding at end of year………………………. Exercisable at end of year……...………………... Weighted average per share fair value of options granted during the year……………………….. 1,953,098 337,250 (87,298) (70,918) 2,132,132 1,541,670 $20.886 $25.233 $18.672 $25.182 $21.522 $20.057 $1.028 2,128,571 339,750 (386,384) (128,839) 1,953,098 1,286,554 $19.617 $25.510 $16.914 $24.030 $20.886 $19.020 $ 1.073 2,235,226 559,178 (503,882) (161,951) 2,128,571 1,261,372 $17.748 $25.472 $17.380 $20.995 $19.617 $17.553 $ 1.266 PROXY STATEMENT The fair value of each option grant was estimated on the date of the grant using the Black-Scholes options pricing model with the following assumptions: weighted average risk free interest rates used in 2006, 2005 and 2004 were 5.0%, 5.0% and 5.6%, respectively, expected average lives of five years, annual dividend rates of $1.9232 and weighted average volatility of 12.3%, 12.3% and 12.2% in 2006, 2005 and 2004, respectively. The following table summarizes information regarding the options outstanding at December 31, 2006 under the Company’s Plans: Options Outstanding WeightedNumber Average Range of Outstanding at Remaining Exercise Prices December 31, 2006 Contractual Life $18.750 – $20.750 $20.500 $15.000 $12.280 $14.750 $17.610 $18.930 – $22.360 $19.560 – $26.690 $24.740 – $25.670 $25.220 – $25.650 264,848 146,122 265,334 8,135 42,816 153,315 256,477 428,834 259,501 306,750 2,132,132 0.4 1.4 2.2 3.2 4.2 5.2 6.2 7.2 8.2 9.4 5.4 WeightedAverage Exercise Price $20.224 $20.500 $15.000 $12.280 $14.750 $17.610 $19.015 $25.353 $25.565 $25.234 $21.522 Options Exercisable Number Exercisable at December 31, 2006 264,848 146,122 265,334 8,135 42,816 153,315 256,477 288,496 98,127 18,000 1,541,670 WeightedAverage Exercise Price $20.224 $20.500 $15.000 $12.280 $14.750 $17.610 $19.015 $25.365 $25.577 $25.220 $20.057 FORM 10-K CORPORATE INFORMATION 75 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) All options granted under the Plans, except those number of options noted as exceptions, are exercisable over a three-year period. The three-year period vests with options exercisable at a rate of 33.3% per annum beginning with the first anniversary of the date of grant and will remain exercisable through the tenth anniversary of such date. Exceptions to this vesting schedule are options that are exercisable immediately and will remain exercisable through the tenth anniversary of date granted. The number of options that are exercisable immediately are 18,000 shares granted under the 2004 Plan in 2006, 2005 and 2004. The following table summarizes the intrinsic value of options exercised and fair value of options vested for the three years ended December 31, 2006, 2005 and 2004. PROXY STATEMENT For the year ended December 31, 2006 Aggregate intrinsic value of options exercised... Aggregate fair value of options vested………… 16. Employee Benefit Plan – 401(k) Plan $ 697 $ 336 For the year ended December 31, 2005 $ 3,255 $ 324 For the year ended December 31, 2004 $ 4,354 $ 135 In January 1996, the Company established a qualified retirement savings plan under Code 401(k) for eligible employees, which contains a cash or deferred arrangement which permits participants to defer up to a maximum of 25.0% of their compensation, subject to certain limitations. Employees 21 years old or above who have been employed by the Company for at least six months are eligible to participate. Participant’s salary deferrals up to a maximum of 4.0% of qualified compensation were matched at 50.0% for the year ended December 31, 2004. The Company contributed $417, $373 and $228 to the plan in 2006, 2005 and 2004, respectively. Effective January 1, 2005, participant’s salary deferrals up to a maximum of 6% of qualified compensation were matched at 50.0%. FORM 10-K 17. Distribution Reinvestment and Share Purchase Plan The Company has a Distribution Reinvestment and Share Purchase Plan under which its shareholders may elect to purchase additional common shares of beneficial interest and/or automatically reinvest their distributions in Shares. In order to fulfill its obligations under the plan, the Company may purchase Shares in the open market or issue Shares that have been registered and authorized specifically for the plan. As of December 31, 2006, 2,100,000 Shares were authorized of which 268,052 Shares have been issued. CORPORATE INFORMATION 76 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) 18. Earnings Per Share The presentation of primary EPS and diluted EPS is summarized in the table below (shares in thousands): 2006 Income Basic EPS Income from continuing operations……… $ (11,602) Less: Preferred stock dividends………… (17,437) Preferred stock redemption………….…. Add: Minority interest adjustments (1)… (5,016) (Loss) income from continuing operations……………………………… $ (34,055) Discontinued operations…………………. $ (65,563) Less: Minority interest adjustment (1)…. 5,016 Discontinued operations……………… $(60,547) Diluted EPS Income from continuing operations……… Less: Preferred stock dividends………… Preferred stock redemption…………….. Add: Minority interest …………..……... Operating Partnership Units……………... Options…………………………………... Restricted shares…………………………. (Loss) income from continuing operations…………………………...…… … Discontinued operations…………………. Shares For the Years Ended December 31, 2005 Per Per Share Income Shares Share Income $ $ 31,666 (17,437) (928) 36,611 $(0.93) $ 13,301 36,036 $ 0.37 $22,488 (17,517) (4,878) 2,671 $ 2,764 $29,267 (2,671) $26,596 35,456 $ 0.08 2004 Shares Per Share PROXY STATEMENT 36,611 $(10,816) 928 $(1.65) $ (9,888) 36,036 $(0.27) 35,456 $ 0.75 $(11,602) (17,437) (7,733) 36,611 $ $ 31,666 (17,437) 252 36,036 $22,488 (17,517) (4,878) 2,906 35,456 ______ 3,035 $(0.93) $(1.65) $ 14,481 $(10,816) 3,333 449 38 39,856 $ 0.36 $(0.27) ______ $ 2,999 $ 29,267 3,549 491 _____ 39,496 $ 0.08 $ 0.74 FORM 10-K $ (36,772) 39,646 $ (65,563) (1) The minority interest adjustment reflects the reclassification of the minority interest expense from continuing to discontinued operations for appropriate allocation in the calculation of the earnings per share for discontinued operations. Options with exercise prices greater than the average share prices for the periods presented were excluded from the respective computations of diluted EPS because to do so would have been antidilutive for 2005 and 2004. The number of such options was 599,000 and 429,000 for the years ended December 31, 2005 and 2004, respectively. All common stock equivalents have been excluded in 2006 as they are antidilutive. 19. Fair Value of Financial Instruments The carrying values of cash and cash equivalents, restricted cash, tenant accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair values because of the short maturity of these financial instruments. The carrying value of the credit facility is also a reasonable estimate of its fair value because it bears variable rate interest at current market rates. Based on the discounted amount of future cash flows using rates currently available to GRT for similar liabilities (ranging from 5.58% to 7.85% per annum at December 31, 2006 and 5.05% to 7.28% per annum at December 31, 2005), the fair value of GRT’s mortgage notes payable is estimated at $1,282,023 and $1,358,744 at December 31, 2006 and 2005, respectively. The fair value of the debt instruments considers in part the credit of GRT as an entity, and not just the individual entities and Properties owned by GRT. CORPORATE INFORMATION 77 PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) 20. Acquisitions The Company accounts for acquisitions under the purchase method of accounting in accordance with SFAS No. 141, “Business Combinations.” The Company has finalized the allocation of the purchase price for Properties acquired through 2006 and no material adjustments have been made to the original allocations. Intangibles, which were recorded at the acquisition date, associated with acquisitions of WestShore Plaza, Eastland Mall in Columbus, Ohio, Polaris and Polaris Towne Center, are comprised of an asset for acquired abovemarket leases of $7,940, a liability for acquired below-market leases of $17,951 and an asset for tenant relationships of $4,156. The intangibles related to above and below-market leases are being amortized as a net increase to minimum rents on a straight-line basis over the lives of the leases with a weighted average amortization period of 10.2 years. Amortization of the tenant relationship is recorded as amortization expense on a straight-line basis over the estimated life of the 12.5 years. Net amortization for all of the acquired intangibles is an increase to net income in the amount of $656, $415 and $611 for the years ended December 31, 2006, 2005 and 2004, respectively. The net book value of the above-market leases is $4,689 and $5,494 as of December 31, 2006 and December 31, 2005, respectively, and is included in the accounts payable and accrued liabilities on the consolidated balance sheet. The net book value of the below-market leases is $12,091 and $13,663 as of December 31, 2006 and December 31, 2005, respectively, and is included in the accounts payable and accrued liabilities on the consolidated balance sheet. The net book value of the tenant relationships is $3,169 and $3,498 as of December 31, 2006 and December 31, 2005, respectively, and is included in prepaid and other assets on the consolidated balance sheet. On January 17, 2006, GPLP acquired Tulsa from an independent third party. The purchase price was $58,300 and the Company did not assume any debt in connection with the purchase. On March 14, 2006, GPLP transferred all of its ownership interest in Tulsa to the ORC Venture for total consideration of $58,300 (which included the ORC Venture’s assumption of a $35,000 mortgage loan). Net amortization of intangibles as an increase to net income will be as follows: For the year ending December 31, 2007………………………….. For the year ending December 31, 2008………………………….. For the year ending December 31, 2009………………………….. For the year ending December 31, 2010………………………….. For the year ending December 31, 2011………………………….. $ 416 484 480 553 525 $2,458 FORM 10-K PROXY STATEMENT 21. Discontinued Operations Financial results of Properties the Company sold in previous periods and classified as held-for-sale as of yearend are reflected in discontinued operations for all periods reported in the consolidated statements of income. The table below summarizes key financial results for these operations: For the Years Ended December 31, 2006 2005 2004 Revenues…………………………………………………………. $ 44,907 $ 52,640 $ 66,340 Operating expenses………………………………………………. (25,089) (34,198) (40,976) Operating income……..………………………………………….. 19,818 18,442 25,364 Interest expense, net……………………………………………… (12,511) (14,484) (15,743) Costs associated with debt defeasance…………………………… (9,357) Net (loss) income before impairment losses…………………..…. (2,050) 3,958 9,621 Impairment losses on real estate…………………………...…….. (65,230) (16,393) Net (loss) income from discontinued operations………………… $ (67,280) $ (12,435) $ 9,621 78 CORPORATE INFORMATION PRESIDENT’S LETTER NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued (dollars in thousands, except share and unit amounts) The impairment losses recorded in 2006 primarily relate to two of our held-for-sale Mall assets. Montgomery Mall had impairment charges in 2006 of $56,994 and Eastland Mall in Charlotte, North Carolina of approximately $6,778. These charges were recorded based upon the Company’s decision to sell these assets. The facts and information available to the Company through the sales process assisted the Company in determining the value for these assets. The impairment losses recorded in 2005 relate to the Company’s decision to sell all but four of its remaining Community Center Properties. 22. Subsequent Events Effective January 1, 2007, the Company’s 401(k) plan qualifies as a safe harbor plan. The Company has committed to an employer contribution at a required level that will permit highly compensated employees to defer the maximum amount and the plan is automatically in compliance for actual deferral percentage (ADP) and actual contribution percentage (ACP) testing. 23. Interim Financial Information (unaudited) Second Quarter $ 73,211 $ 73,211 $ 24,922 $ 24,922 $(38,686) $(43,045) $ (1.17) Second Quarter $73,098 $73,098 $22,989 $22,985 $ 3,279 $ (1,080) $ (0.03) Third Quarter $74,530 $74,530 $25,363 $25,363 $ 6,070 $ 1,710 $ 0.05 Third Quarter $76,124 $76,124 $28,313 $28,309 $(2,342) $(6,702) $ (0.18) Fourth Quarter $ 86,075 $ 86,075 $(12,044) $(12,044) $(52,892) $(57,251) $ (1.56) Fourth Quarter $ 80,279 $ 90,052 $ 31,931 $ 35,016 $ 14,117 $ 9,758 $ 0.27 PROXY STATEMENT First Year Ended December 31, 2006 Quarter Total revenues……………………………………………………… $75,448 Total revenues as previously reported……………………………... $83,859 Operating income (loss)………………………………………….… $25,501 Operating income (loss) as previously reported……………..…….. $28,314 Net income (loss)…………………………………………………... $ 8,343 Net income (loss) available to common shareholders……………... $ 3,984 Earnings (loss) per share (diluted)…………………………………. $ 0.11 First Year Ended December 31, 2005 Quarter Total revenues……………………………………………………… $70,525 Total revenues as previously reported……………………………... $79,573 Operating income ………………………………………………..… $22,761 Operating income as previously reported……………………..…… $25,620 Net income (loss)………………………………………………… $ 5,796 Net income (loss) available to common shareholders……………... $ 1,437 Earnings (loss) per share (diluted) ………………………………… $ 0.04 FORM 10-K Total revenues and operating income for 2006 and 2005 are restated to reflect SFAS 144. Net income available to shareholders reflects the net gains and losses associated with the sale of discontinued operations. It also reflects the income and loss from discontinued operations. The differences between revenues and revenues previously reported in interim financial statements in 2006 and 2005 relate to changes in property classification from continuing to discontinued operations. CORPORATE INFORMATION 79 CORPORATE INFORMATION FORM 10-K PROXY STATEMENT PRESIDENT’S LETTER GLIMCHER REALTY TRUST SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION as of December 31, 2006 (dollars in thousands) Costs Capitalized Subsequent Initial Cost Date Buildings and Improvements Land [a] and Adjustments Land [b] [c] [b] [c] Depreciation Completed Improvements Improvements Total Accumulated Was Buildings and Construction Date Acquired to Acquisition Carried at Close of Period Life Upon Which Depreciation in Latest Statement of Operations is Computed Gross Amounts at Which Description and Location of Property Encumbrances [d] MALL PROPERTIES Ashland Town Center $ 9,765 9,068 12,570 3,961 15,646 892 32,498 47,737 5,438 4,462 39,439 3,320 102,914 21,825 7,696 4,405 115,219 44,719 47,737 206,478 22,681 33,480 19,497 12,695 773 32,311 228,177 159,938 122,481 42,816 101,790 (39,229) 12,321 65,886 41,135 37,389 3,961 78,524 17,794 28,475 12,937 45,902 58,839 82,485 78,207 33,084 261,657 207,675 130,177 47,221 90,676 17,694 7,509 109,929 117,438 43,770 1,596 9,704 45,427 55,131 3,866 $ 21,454 $ 7,683 $ 4,144 $ 28,859 $ 33,003 $ 12,826 14,148 25,969 4,577 25,420 38,114 17,193 64,016 33,996 43,614 12,267 1993 2000 1999 1986 2000 1998 1989 2003 2002 2003 1993 [e] [e] [e] [e] [e] [e] [e] [e] [e] [e] [e] Ashland, KY $ 24,809 Colonial Park Mall Harrisburg, PA $ 32,451 Dayton Mall Dayton, OH $ 55,886 Eastland Mall Columbus, OH $ 43,000 Grand Central Mall Parkersburg, WV $ 47,815 Great Mall of the Great Plains Olathe, KS $ 30,000 Indian Mound Mall Newark, OH $ - Jersey Gardens Mall Elizabeth, NJ $ 158,791 Lloyd Center Portland, OR $ 133,256 The Mall at Fairfield Commons Beavercreek, OH $ 109,232 The Mall at Johnson City Johnson City, TN $ 38,787 80 GLIMCHER REALTY TRUST SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION as of December 31, 2006 (dollars in thousands) Costs Capitalized Subsequent Initial Cost Date Buildings and Improvements Land [a] and Adjustments Land [b] [c] [b] [c] Depreciation Improvements Improvements Total Accumulated Buildings and Construction Was Completed Date Acquired to Acquisition Carried at Close of Period Life Upon Which Depreciation in Latest Statement of Operations is Computed Gross Amounts at Which Description and Location of Property Encumbrances [d] Morgantown Mall $ 1,190 13,264 36,687 875 1,058 3,237 15,653 145,158 7,490 15,653 23,479 7,532 3,298 30,950 152,648 104,612 845 7,187 99,328 26,910 18,552 1,001 45,336 167,251 4,611 38,661 169,888 208,549 46,337 106,515 34,248 168,301 40,988 15,576 13,466 56,362 69,828 23,475 8,363 1,248 31,780 33,028 1,273 $ 40,484 $ 5,050 $ 1,556 $ 45,251 $ 46,807 $ 19,187 14,523 13,978 28,964 21,989 33,998 12,320 19,025 1987 2002 1998 2003 1990 1988 1998 2004 [e] [e] [e] [e] [e] [e] [e] [e] Morgantown, WV (g) New Towne Mall New Philadelphia, OH $ - Northtown Mall Blaine, MN $ - Polaris Fashion Place Columbus, OH $ 142,129 River Valley Mall Lancaster, OH $ 50,000 Supermall of Great NW Auburn, WA $ 59,515 Weberstown Mall Stockton, CA $ 60,000 Westshore Plaza Tampa, FL $ 95,255 COMMUNITY CENTERS Knox Village Square 865 175 502 19,082 38,950 6,373 655 318 7,549 12,652 8,479 406 869 461 19,082 8,881 20,376 7,069 39,268 9,750 20,376 7,530 58,350 3,289 6,511 2,827 7,600 1992 1991 1989 2004 [e] [e] [e] [e] Mount Vernon, OH $ 8,753 Morgantown Commons Morgantown, WV (g) Ohio River Plaza Gallipolis, OH $ - Polaris Town Center Columbus, OH $ 40,482 81 PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION CORPORATE INFORMATION FORM 10-K PROXY STATEMENT PRESIDENT’S LETTER GLIMCHER REALTY TRUST SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION as of December 31, 2006 (dollars in thousands) Costs Capitalized Subsequent Initial Cost Date Buildings and Improvements Land [a] and Adjustments Land [b] [c] [b] [c] Depreciation Completed Improvements Improvements Total Accumulated Was Buildings and Construction Date Acquired to Acquisition Carried at Close of Period Life Upon Which Depreciation in Latest Statement of Operations is Computed Gross Amounts at Which Description and Location of Property Encumbrances [d] CORPORATE ASSETS Glimcher Properties Limited $ $ 1,780 $ 10,112 $ $ 11,892 $ 11,892 $ 6,247 [e] Partnership $ - Lloyd Ice Rink 600 600 600 56 56 56 39 478 [e] [e] OEC $ - University Mall Theater OEC $ - $ 239,764 $ 1,435,654 $ 251,666 $ 247,149 $ 1,679,935 $ 1,927,084 $ 483,115 DEVELOPMENTS IN PROGRESS Georgesville Square $ 1,937 $ 1,937 $ 4,561 $ 7,643 20,391 $ 273 264 3,925 5,716 $ 4,561 804 1,231 10,946 $ $ 725 $ 296 $ 429 10,946 6,071 9 12,206 2,085 4,698 7,643 44,087 $ $ 725 10,946 7,302 273 12,206 6,010 4,698 7,643 49,803 $ - Columbus, OH $ - City Park Cincinnati, OH $ - Jersey Gardens Center Elizabeth , NJ $ - Meadowview Square Kent, OH $ - Dayton Streetscape Dayton, OH $ - Johnson City Redevelopment Johnson City, TN $ - GB Northtown Blaine, MN $ - Other Developments $ - 82 GLIMCHER REALTY TRUST SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION as of December 31, 2006 (dollars in thousands) Costs Capitalized Subsequent Initial Cost Date Buildings and Improvements Land [a] and Adjustments Land [b] [c] [b] [c] Depreciation Improvements Improvements Total Accumulated Buildings and Construction Was Completed Date Acquired to Acquisition Carried at Close of Period Life Upon Which Depreciation in Latest Statement of Operations is Computed Gross Amounts at Which Description and Location of Property Encumbrances [d] ASSETS HELD FOR SALE (h) Almeda Mall $ 5,357 10,382 9,114 13,314 45,026 245,255 (45,403) 40,633 108,230 9,205 13,314 117,435 204,245 12,820 1,119 9,928 13,125 60,311 (50,823) 4,455 15,415 47,860 (6,225) 5,315 41,677 46,992 19,870 23,053 130,749 244,878 6,859 $ 16,034 $ 1,321 $ 7,621 $ 16,593 $ 24,214 $ 4,549 5,143 15,415 3,225 26,733 55,065 2002 2003 1998 2002 1997 [e] [e] [e] [e] [e] Houston, TX (f) Eastland Mall Charlotte, NC $ 43,766 Montgomery Mall Montgomery, AL $ 25,000 Northwest Mall Houston, TX (f) University Mall Tampa, FL $ - Total $ 286,727 $ 1,685,470 $ 226,654 $ 293,498 $ 1,928,267 $ 2,221,765 $ 538,180 83 PRESIDENT’S LETTER PROXY STATEMENT FORM 10-K CORPORATE INFORMATION PRESIDENT’S LETTER GLIMCHER REALTY TRUST NOTES TO SCHEDULE III (dollars in thousands) (a) Initial cost for constructed and acquired property is cost at end of first complete calendar year subsequent to opening or acquisition. (b) The aggregate gross cost of land as of December 31, 2006. (c) The aggregate gross cost of building, improvements and equipment as of December 31, 2006. (d) See description of debt in Note 5 of Notes to consolidated financial statements. PROXY STATEMENT (e) Depreciation is computed based upon the following estimated weighted average composite lives: Buildings and improvements-40 years; equipment and fixtures-five to ten years. (f) Properties cross-collateralize the following loan: SAN Mall, L.P........................................................................................................................ (g) Properties cross-collateralize the following loan: Morgantown Mall Associates Limited Partnership ................................................................ $33,020 $52,474 (h) Properties were held for sale at December 31, 2006. The total for building and improvements for the assets held-for-sale excludes the deferred costs of $2,488 that appear on the consolidated balance sheet. Reconciliation of Real Estate Year Ended December 31, 2006 2005 2004 Balance at beginning of year ............................................................ Additions: Improvements ............................................................................. Acquisitions ................................................................................ Deductions ...................................................................................... Balance at close of year .................................................................... $2,211,614 79,512 61,276 (375,515) $1,976,887 $2,250,640 $ 2,092,202 FORM 10-K 109,159 32,684 261,036 (148,185) (135,282) $2,211,614 $ 2,250,640 Reconciliation of Accumulated Depreciation Year Ended December 31, 2006 2005 2004 CORPORATE INFORMATION Balance at beginning of year ............................................................ Depreciation expense and other...................................................... Deductions ...................................................................................... Balance at close of year .................................................................... $470,397 70,281 (57,563) $483,115 $435,821 72,472 (37,896) $470,397 $394,870 95,463 (54,512) $435,821 The aggregate cost of land and buildings, improvements and equipment for federal income tax purposes is approximately $2,318,332. 84 EXHIBIT 31.1 CERTIFICATIONS I, Michael P. Glimcher, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Glimcher Realty Trust; 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; 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; 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; PROXY STATEMENT PRESIDENT’S LETTER 3. 4. 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; FORM 10-K 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 CORPORATE INFORMATION 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. Date: February 23, 2007 /s/ Michael P. Glimcher Michael P. Glimcher President, Chief Executive Officer and Trustee (Principal Executive Officer) EXHIBIT 31.2 PRESIDENT’S LETTER CERTIFICATIONS I, Mark E. Yale, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Glimcher Realty Trust; 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; 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; 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; 3. 4. PROXY STATEMENT 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; FORM 10-K 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 CORPORATE INFORMATION 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. Date: February 23, 2007 /s/ Mark E. Yale Mark E. Yale, Executive Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) PRESIDENT’S LETTER 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 accompanying Form 10-K of Glimcher Realty Trust (the “Company”) for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael P. Glimcher, President, Chief Executive Officer and Trustee of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the SarbanesOxley Act of 2002, that: PROXY STATEMENT 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. FORM 10-K Date: February 23, 2007 /s/ Michael P. Glimcher Michael P. Glimcher President, Chief Executive Officer and Trustee (Principal Executive Officer) A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Glimcher Realty Trust and will be retained by Glimcher Realty Trust and furnished to the Securities and Exchange Commission or its staff upon request. CORPORATE INFORMATION PRESIDENT’S LETTER Exhibit 32.2 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 accompanying Form 10-K of Glimcher Realty Trust (the “Company”) for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark E. Yale, Exeutive Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) of the Company, certify, to the best of my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that: PROXY STATEMENT 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. FORM 10-K Date: February 23, 2007 /s/ Mark E. Yale Mark E. Yale Executive Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) CORPORATE INFORMATION A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Glimcher Realty Trust and will be retained by Glimcher Realty Trust and furnished to the Securities and Exchange Commission or its staff upon request. List of Subsidiaries Glimcher Realty Trust (“GRT”) has the following subsidiaries and interests: 1. 2. 3. 4. 5. 6. 7. 8. 9. Glimcher Properties Corporation, a Delaware corporation (100% shareholder); Exhibit 21.1 PRESIDENT’S LETTER Glimcher Properties, LP, a Delaware limited partnership (approximately 92% limited partnership interest); Glimcher Johnson City, Inc., a Delaware corporation (100% shareholder); Glimcher Dayton Mall, Inc. a Delaware corporation (100% shareholder); Glimcher Colonial Trust, a Delaware business trust (100% beneficiary); Glimcher Colonial Park Mall, Inc., a Delaware corporation (100% shareholder); Glimcher Tampa, Inc., a Delaware corporation (100% shareholder); Glimcher Auburn, Inc., a Delaware corporation (100% shareholder); Glimcher Weberstown, Inc., a Delaware corporation (100% shareholder); PROXY STATEMENT 10. Glimcher Montgomery, Inc., a Delaware corporation (100% shareholder); 11. Glimcher Mount Vernon, Inc., a Delaware corporation (100% shareholder); 12. Glimcher PTC, Inc., a Delaware corporation (100% shareholder); 13. Glimcher Eastland, Inc., a Delaware corporation (100% shareholder); 14. Glimcher Loyal Plaza, Inc., a Delaware corporation (100% shareholder); and FORM 10-K 15. Glimcher Loyal Plaza Tenant, Inc., a Delaware corporation (100% shareholder). Glimcher Properties Corporation has the following subsidiaries: 1. 2. 3. Glimcher Grand Central, Inc., a Delaware corporation (100% shareholder); Glimcher Morgantown Mall, Inc., a Delaware corporation (100% shareholder); and San Mall Corporation, a Delaware corporation (100% shareholder). Glimcher Properties Limited Partnership has the following interests: CORPORATE INFORMATION 1. 2. 3. 4. 5. 6. 7. Grand Central, LP, a Delaware limited partnership (99% limited partnership interest); Glimcher University Mall, LP, a Delaware limited partnership (99% limited partnership interest); Morgantown Mall Associates, LP, an Ohio Limited partnership (99% limited partnership interest); Johnson City Venture LLC, a Delaware limited liability company (99% member interest); Dayton Mall Venture LLC, a Delaware limited liability company (99% member interest); Colonial Park Mall LP, a Delaware limited partnership (99.5% limited partnership interest); Colonial Park Trust, a Delaware business trust (Colonial Park Mall LP is the 100% beneficiary); 8. PRESIDENT’S LETTER Catalina Partners, L.P., a Delaware limited partnership (99% limited partnership interest owned by Colonial Park Mall LP and Colonial Park Trust is the sole general partner owning the remaining 1%); Glimcher Development Corporation, a Delaware corporation (100% shareholder); 9. 10. Weberstown Mall, LLC, a Delaware limited liability company (99% member interest); 11. Glimcher Northtown Venture, LLC, a Delaware limited liability company (100% member interest); 12. Montgomery Mall Associates, LP, a Delaware limited partnership (99% limited partnership interest); 13. Glimcher SuperMall Venture, LLC, a Delaware limited liability company (99% member interest); 14. SAN Mall, LP, a Delaware limited partnership (99.5% limited partnership interest); 15. Polaris Center, LLC, a Delaware limited liability company (99% member interest); PROXY STATEMENT 16. JG Elizabeth, LLC, a Delaware limited liability company (100% member interest); 17. Tulsa Promenade, LLC, a Delaware limited liability company (100% member interest held by Tulsa Promenade REIT, LLC); 18. Charlotte Eastland Mall, LLC, a Delaware limited liability company (99% member interest); 19. Polaris Mall, LLC, a Delaware limited liability company (100% member interest); 20. PFP Columbus, LLC, a Delaware limited liability company (100% member interest owned by Polaris Mall LLC); 21. Great Plains MetroMall, LLC, a Colorado limited liability company (100% member interest); FORM 10-K 22. Mount Vernon Venture, LLC, a Delaware limited liability company (99% member interest); 23. Loyal Plaza Venture, LP, a Delaware limited partnership (99% limited partnership interest); 24. Glimcher Loyal Plaza Tenant, LP, a Delaware limited partnership (99% limited partnership interest); 25. Jersey Gardens Center, LLC, a Delaware limited liability company (100% member interest); 26. GM Mezz, LLC, a Delaware limited liability company (100% member interest owned by Great Plains MetroMall, LLC); 27. RVM Glimcher, LLC, a Delaware limited liability company (100% member interest); 28. Southside Mall, LLC, a Delaware limited liability company (100% member interest); CORPORATE INFORMATION 29. Glimcher Ashland Venture, LLC, a Delaware limited liability company (100% member interest); 30. GM Olathe, LLC, a Delaware limited liability company (100% member interest owned by GM Mezz, LLC) 31. Glimcher Columbia, LLC, a Delaware limited liability company (100% member interest); 32. Fairfield Village, LLC, a Delaware limited liability company (100% member interest); 33. Glimcher JG Urban Renewal, Inc., a New Jersey corporation (100% shareholder); 34. N.J. Metromall Urban Renewal, Inc., a New Jersey corporation (100% shareholder); 35. LC Portland, LLC, a Delaware limited liability company (100% member interest); 36. GB Northtown, LLC, a Delaware limited liability company (100% member interest); 37. Glimcher WestShore, LLC, a Delaware limited liability company (100% member interest); 38. MFC Beavercreek, LLC, a Delaware limited liability company (100% member interest); 39. EM Columbus, LLC, a Delaware limited liability company (100% member interest); 40. Mainstreet Maintenance, LLC, an Ohio limited liability company (100% member interest); 41. Ohio Retail Security, LLC, an Ohio limited liability company (100% member interest); 42. Wilora Lake Properties, LLC, a Delaware limited liability company (100% member interest); 43. Glimcher Polaris, LLC, a Delaware limited liability company (100% member interest); 44. OG Retail Holding Co., LLC, a Delaware limited liability company (52% member interest – unconsolidated joint venture subsidiary); 45. Puente Hills Mall REIT, LLC, a Delaware limited liability company (100% Class A Membership interests held by OG Retail Holding Co., LLC); and 46. GPLP Surprise Venture, LLC, a Delaware liability company (100% member interest) 47. Surprise Peripheral Venture, LLC, an Arizona limited liability company (50% member interest held by GPLP Surprise Venture, LLC); 48. WTM Glimcher, LLC, a Delaware liability company (100% member interest held by Weberstown Mall, LLC); 49. Glimcher Surprise, LLC, a Delaware liability company (100% memberp interest); FORM 10-K PROXY STATEMENT PRESIDENT’S LETTER 50. Polaris Lifestyle Center, LLC, a Delaware liability company (100% member interest); 51. Glimcher Kierland Crossing, LLC, a Delaware liability company (100% member interest); 52. Kierland Crossing, LLC, a Delaware liability company (50% member interest held by Glimcher Kierland Crossing, LLC); 53. Tulsa Promenade REIT, LLC, a Delaware liability company (100% Class A membership held by OG Retail Holding Co., LLC); 54. EM Columbus II, LLC, a Delaware limited liability company (100% member interest); and 55. RV Boulevard Holdings, LLC, a Delaware limited liability company (100% member interest). 56. Puente Hills Mall, LLC, a Delaware limited liability company (100% member interest held by Puente Hills Mall REIT, LLC) Glimcher Development Corporation has the following subsidiaries and interests: 1. 2. 3. 4. 5. Ohio Entertainment Corporation, a Delaware corporation (100% shareholder); Trans State Development, Inc., a Delaware corporation (100% shareholder); Trans State Development, LLC, a Delaware limited liability company (99% member interest); Mason Park Center, Inc., a Delaware corporation (100% shareholder); Mason Park Center, LLC, a Delaware limited liability company (99% member interest); CORPORATE INFORMATION 6. PRESIDENT’S LETTER GDC Retail, Inc., a Delaware corporation (100% shareholder); GDC Retail, LLC, a Delaware limited liability company (99% member interest); SR 741, Inc., a Delaware corporation (100% shareholder); SR 741, LLC, a Delaware limited liability company (99% member interest); and 7. 8. 9. 10. California Retail Security, Inc., an Ohio corporation (100% shareholder). CORPORATE INFORMATION FORM 10-K PROXY STATEMENT 2006 Annual Report / 2006 Annual Report / 2006 Annual Report / 2006 Glimcher Realty Trust 150 East Gay Street Columbus, Ohio 43215 www.glimcher.com