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News Release

Federal Realty Investment Trust Announces Fourth Quarter and Year-End 2003 Operating Results

ROCKVILLE, Md.--(BUSINESS WIRE)--Feb. 17, 2004--Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its fourth quarter and year ended December 31, 2003.

  • Funds from Operations (FFO) was $0.82 per diluted share for the fourth quarter and net income per diluted share was $0.66.
  • FFO was $2.70 per diluted share for the year and net income per diluted share was $1.59.
  • When compared to 2002, same-center property operating income, including redevelopments and expansions, increased 1.8% for the fourth quarter and 2.7% for the year.
  • Cash rent increases on lease rollovers were 14.3% for the fourth quarter and 15.3% for the year on approximately 250,000 and 1.3 million square feet of comparable retail space, respectively.
  • During 2003, the Trust acquired four shopping center assets (committing a total of $125 million of capital) and completed seven dispositions generating net proceeds of $44 million.
  • At Santana Row, 97% of the residential units and 89% of the retail square footage were leased.
  • FFO per diluted share guidance for 2004 remains unchanged at a range of $2.78 to $2.82.

Financial Results

Federal Realty reported FFO of $41.4 million for the fourth quarter of 2003, or $0.82 per diluted share. This compares to FFO of $14.0 million for the fourth quarter of 2002, or $0.32 per diluted share. Net income available for common shareholders was $32.5 million, or $0.66 per diluted share for the quarter ended December 31, 2003. For the fourth quarter of 2002, the Trust reported a net loss of $2.1 million, or a loss of $0.05 per diluted share. For the year ended December 31, 2003, Federal Realty reported FFO of $131.3 million, or $2.70 per diluted share, and net income of $76.0 million, or $1.59 per diluted share. This compares to FFO of $90.5 million, or $2.11 per diluted share, and net income of $35.9 million, or $0.85 per diluted share for the year ended December 31, 2002.

"Our Company accomplished much of what it set out to do in 2003, and the groundwork is laid for a very successful 2004," commented Donald Wood, Federal Realty's President and Chief Executive Officer. "Our core redevelopment plan is thriving with grocers expanding and new anchor tenants doing business in many of our shopping centers. Our record leasing activity in 2003, encompassing over 1.6 million square feet of space, ensures our growth in 2004 and beyond."

Portfolio Results

On a same-center basis, including redevelopment and expansion properties, property operating income increased 1.8% over fourth quarter 2002. When redevelopment and expansion properties are excluded from the same-center results, property operating income increased slightly over fourth quarter 2002. For the year ended December 31, 2003, same-center property operating income increased 2.7% when redevelopments and expansions are included, and 2.4% when redevelopment and expansion properties are excluded.

As of December 31, 2003, Federal Realty's same-center portfolio was 94.3% leased compared to 95.2% on September 30, 2003, and 95.4% on December 31, 2002. Overall, the Trust's portfolio was 93.1% leased as of December 31, 2003, compared to 93.9% on September 30, 2003, and 94.7% on December 31, 2002.

"Much of the Trust's increased vacancy that depressed our same-center results represents space that will be the source of future growth. In fact, as of December 31, 2003, 300,000 square feet of vacant space was under lease, but was not yet occupied or rent paying and therefore not contributing to our same-center results," commented Larry Finger, Federal Realty's Senior Vice President and Chief Financial Officer. "With our focus on redevelopment, we expect to have periods where portfolio vacancy is temporarily above normal. This is simply the short-term cost of capitalizing on growth opportunities."

During the fourth quarter, the Trust signed 79 leases for approximately 271,000 square feet of retail space. On a comparable space basis (i.e. spaces for which there was a former tenant), the Trust leased 249,000 square feet at an average cash-basis contractual rent increase per square foot (i.e. excluding the impact of straight-line rents) of 14.3%. The weighted-average contractual rent on this comparable space for the first year of the new lease was $25.43 per square foot compared to the weighted-average contractual rent of $22.24 per square foot for the last year of the prior lease. The previous weighted-average contractual rent is calculated by including both the minimum rent and the percentage rent actually paid during the last year of the lease term for the re-leased space. For 2003, Federal Realty leased a record 1.6 million square feet of retail space, of which nearly 1.3 million square feet was comparable retail space, which was leased at an average contractual rent increase of 15.3%. On a GAAP basis (i.e. including the impact of straight-line rents), rent increases per square foot for comparable retail space were 27.4% for the fourth quarter and 26.9% for all of 2003. As of December 31, 2003, Federal Realty's weighted-average contractual rent for retail space in its portfolio was $17.89 per square foot.

Santana Row

At Santana Row, Federal Realty's mixed-use community in San Jose, Calif., 89% of the retail space was leased as of January 15, 2004, with 92 tenants open and operating. Best Buy, The Container Store and Club One, a 30,000 square foot full service health club, have opened for business since the end of the third quarter. With respect to the residential component of Santana Row, 97% of the 255 existing residential units were leased as of February 2, 2004. Construction of the 96 townhomes and 160 flats on Building 7 that comprise Santana Row Phase IV, began in November 2003, with the first units expected to be delivered in early 2005.

Guidance

Federal Realty is today reconfirming previous guidance for 2004 FFO per diluted share of a range of $2.78 to $2.82, or $1.15 to $1.19 of net income per diluted share.

Summary of Other Quarterly Activities and Recent Developments

  • January 21, 2004 - Federal Realty priced a $75 million offering of seven-year senior unsecured notes. The 4.50% notes are due February 15, 2011, and were offered at 99.698% of par. Proceeds from the offering were primarily used to repay existing corporate debt.
  • January 13, 2004 - Federal Realty increased its previously issued FFO per diluted share guidance to $2.69 in 2003, and to a range of $2.78 to $2.82 in 2004. The increase in FFO guidance resulted from the final settlement of the Santana Row fire insurance claim, and is net of the $0.07 per diluted share impact related to the redemption of preferred shares in the second quarter of 2003 pursuant to EITF Issue D-42. The final $27 million insurance payment, stemming from the August 2002 fire at Santana Row, brought total payments received as a result of the Trust's claims to $129 million. With respect to this final payment of insurance proceeds, Federal Realty realized lost income and operating expense recovery of approximately $8 million in 2003 and will recognize approximately $3 million of lost income in 2004. The remainder of the final payment of insurance proceeds, as well as the $102 million of proceeds previously received, reduced Santana Row's cost basis.
  • January 5, 2004 - Federal Realty announced the sale of four Street Retail properties, totaling 62,000 square feet, in West Hartford, Conn. - 967 and 970 Farmington Avenue, 27-43 LaSalle Road, and 1253 New Britain Avenue - for $15.7 million, generating a book gain of approximately $7.9 million. The sales price reflects a 7.6% capitalization rate based on Federal Realty's estimates of forward 12-month property operating income and an 18.2% unleveraged internal rate of return over Federal Realty's holding period.
  • December 2, 2003 - Federal Realty announced that its Board of Trustees had declared a regular quarterly cash dividend of $0.49 per share on its common shares, resulting in an indicated annual rate of $1.96 per share.
  • November 12, 2003 - Federal Realty announced milestones of progress for Santana Row. Just one year after opening for business, Santana Row had established itself as the premier retail, restaurant, and entertainment destination in the Bay Area. Included among Santana Row's milestones of progress were: Best Buy and The Container Store opened in November 2003 with heavy traffic and strong sales, existing retailers have expanded and brought new concepts, Century Theatres initiated construction of a new CineArts Theatre scheduled to open in 2004, and construction commenced on 256 additional residential units and related amenities.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its fourth quarter and year-end earnings conference call, which is scheduled for Tuesday, February 17, 2004, at noon EST. To participate, please call (888) 566-5771 five to ten minutes prior to the call's start time and use the Passcode EARNINGS (required). The conference leader is Andrew Blocher. Federal Realty will also provide an online Web Simulcast on the company's Web site, www.federalrealty.com, which will remain available for 14 days following the call. A telephone recording of the call will also be available for 14 days by dialing (888) 562-6135.

Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management, development, and redevelopment of shopping centers and Street Retail properties. Federal Realty's portfolio contains approximately 16.2 million square feet located primarily in strategic metropolitan markets in the Northeast, Mid-Atlantic, and Western United States. The operating portfolio was approximately 93% leased to over 2,000 national, regional, and local retailers as of December 31, 2003, with no single tenant accounting for more than 2.3% of rental revenue. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 36 consecutive years, the longest consecutive record in the REIT industry.

Shares of Federal Realty are traded on the NYSE under the symbol FRT. Additional information about Federal Realty can be found on the Internet at www.federalrealty.com.

Safe Harbor Language

Certain matters discussed within this press release may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although Federal Realty believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. The factors that may impact these expectations include:

  • risks of financing, such as our ability to consummate additional financings or obtain replacement financing on terms which are acceptable to us, our ability to meet existing financial covenants and the possibility of increases in interest rates that would result in increased interest expense;
  • risks that our growth will be limited if we cannot obtain additional capital;
  • risks normally associated with the real estate industry, including risks that our tenants will not pay rent or that we may be unable to renew leases or relet space at favorable rents as leases expire, that new acquisitions or our development, construction and renovation projects, including our Santana Row project, may fail to perform as expected, that competition for acquisitions could result in increased prices, that we may have environmental risks at our properties, and, because real estate is illiquid, that we may not be able to sell properties when appropriate;
  • risks related to our status as a REIT for federal income tax purposes, such as the existence of complex regulations relating to our status as a REIT, the effect of future changes in REIT requirements as a result of new legislation and the adverse consequences of the failure to qualify as a REIT; and
  • those additional risks detailed from time to time in our SEC reports, including our current report on Form 8-K filed with the SEC on March 25, 2003, our annual report on Form 10-K filed with the SEC on March 26, 2003, and our quarterly reports on Form 10-Q.

Federal Realty assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

Federal Realty Investment Trust
Summarized Operating Results
December 31, 2003

----------------------------------------------------------------------

                         Financial Highlights
                 (in thousands, except per share data)

OPERATING RESULTS                     Three months       Year ended
-----------------                   ended December 31,   December 31,


                                      2003    2002     2003     2002
                                    ----------------------------------

Revenue
    Rental income                   $94,898 $83,067 $334,697 $295,016
    Other property income             4,622   4,200   17,800   15,468
    Interest and other income         1,574   1,392    5,379    5,156
                                    ----------------------------------
                                    101,094  88,659  357,876  315,640
Expenses
    Rental                           23,811  24,225   83,447   72,990
    Real estate taxes                 9,145   7,983   34,596   30,687
                                    ----------------------------------
Total property operating expenses    32,956  32,208  118,043  103,677
                                    ----------------------------------
Property operating income            68,138  56,451  239,833  211,963

    Interest                         20,682  19,742   75,232   65,058
    Administrative                    2,178   3,581   11,820   13,790
    Restructuring expenses                -  13,780        -   22,269
    Depreciation and amortization    21,022  16,197   75,089   63,777
                                    ----------------------------------
Total other expenses                 43,882  53,300  162,141  164,894
                                    ----------------------------------

Operating income before minority
 interests and discontinued
 operations                          24,256   3,151   77,692   47,069

Minority Interests                   (1,413)   (755)  (4,670)  (4,112)
                                    ----------------------------------
Income from continuing operations    22,843   2,396   73,022   42,957
                                    ----------------------------------

    Operating income from
     discontinued operations            227     383    1,422    2,876
    Gain on sale of real estate      12,330       -   20,053    9,454
                                    ----------------------------------
Income from discontinued operations  12,557     383   21,475   12,330
                                    ----------------------------------

Net income                           35,400   2,779   94,497   55,287

Dividends on preferred stock         (2,869) (4,857) (15,084) (19,425)
Preferred stock redemption - excess
 of redemption cost over carrying
 value                                    -       -   (3,423)       -
                                    ----------------------------------
Net income available for common
 shareholders                       $32,531 $(2,078) $75,990  $35,862
                                    ================------------------


FUNDS FROM OPERATIONS
------------------------------------

Net income available for common
 shareholders                       $32,531 $(2,078) $75,990  $35,862
Gain on sale of real estate         (12,330)      -  (20,053)  (9,454)
Depreciation and amortization of
 real estate assets                  19,067  14,933   68,202   58,605
Amortization of initial direct costs
 of leases                            1,628   1,204    5,801    4,750
Income attributable to operating
 partnership units                      501     (37)   1,317      740
                                    ----------------------------------
Funds from operations               $41,397 $14,022 $131,257  $90,503
                                    ==================================

Weighted average number of common
 shares, diluted                     50,447  44,251   48,619   42,882
                                    ==================================

Funds from operations per share,
 diluted                              $0.82   $0.32    $2.70    $2.11
                                    ==================================

EARNINGS PER COMMON SHARE, BASIC
------------------------------------
      Income from continuing
       operations                     $0.41  $(0.06)   $1.15    $0.57
      Discontinued operations          0.25    0.01     0.45     0.29
                                    ----------------------------------
                                      $0.66  $(0.05)   $1.60    $0.86
                                    ==================================

          Weighted average number of
           common shares, basic      49,066  43,014   47,379   41,624
                                    ==================================

EARNINGS PER COMMON SHARE, DILUTED
====================================
      Income from continuing
       operations                     $0.41  $(0.06)   $1.15    $0.57
      Discontinued operations          0.25    0.01     0.44     0.28
                                    ----------------------------------
                                      $0.66  $(0.05)   $1.59    $0.85
                                    ==================================

          Weighted average number of
           common shares, diluted    50,477  44,251   48,619   42,882
                                    ==================================
Federal Realty Investment Trust
Balance Sheet
December 31, 2003

----------------------------------------------------------------------

                         Financial Highlights
                            (in thousands)

CONSOLIDATED BALANCE SHEETS
----------------------------

                                         December 31,   December 31,
                                             2003           2002
                                        ------------------------------

ASSETS

Real estate, at cost
  Operating                                 $2,342,315     $1,966,338
  Development                                  127,834        340,488
                                        ------------------------------
                                             2,470,149      2,306,826
  Less accumulated depreciation and
   amortization                               (514,177)      (450,697)
                                        ------------------------------
Net real estate investments                  1,955,972      1,856,129

Cash and cash equivalents                       34,968         23,123
Mortgage notes receivable                       48,950         35,577
Accounts and notes receivable                   23,757         18,722
Other assets                                    79,788         65,827
                                        ------------------------------
TOTAL ASSETS                                $2,143,435     $1,999,378
                                        ==============================

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
    Obligations under capital leases,
     mortgages and construction loans         $414,357       $383,812
    Notes payable                              361,323        207,711
    Senior notes and debentures                535,000        535,000
    5 1/4% Convertible subordinated
     debentures                                      -         75,000
    Other liabilities                          111,799        124,202
                                        ------------------------------
Total liabilities                            1,422,479      1,325,725

Minority interests                              29,582         29,366

Commitments and contingencies

Shareholders' equity
    Preferred stock                            135,000        235,000
    Common shares and other
     shareholders' equity                      556,374        409,287
                                        ------------------------------
Total shareholders' equity                     691,374        644,287
                                        ------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
 EQUITY                                     $2,143,435     $1,999,378
                                        ==============================

CONTACT:
Federal Realty Investment Trust
Investor Inquiries: Andrew Blocher, 301/998-8166
ablocher@federalrealty.com
Media Inquiries: Kristine Warner, 301/998-8212
kwarner@federalrealty.com

SOURCE: Federal Realty Investment Trust