Federal Realty Investment Trust Announces Fourth Quarter and Year-End 2010 Operating Results

ROCKVILLE, Md., Feb. 15, 2011 /PRNewswire via COMTEX/ --

Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its fourth quarter and year-ended December 31, 2010.

 

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Financial Results

Federal Realty generated funds from operations available for common shareholders (FFO) of $62.2 million, or $1.01 per diluted share for fourth quarter 2010. This compares to FFO of $60.1 million, or $0.98 per diluted share, in fourth quarter 2009 ($55.4 million or $0.90 per diluted share as adjusted for litigation provision - see below). For the year ending December 31, 2010, Federal Realty reported FFO of $239.2 million, or $3.88 per diluted share. This compares to $211.1 million, or $3.51 per diluted share, for the year ending December 31, 2009 ($227.4 million or $3.78 per diluted share as adjusted for litigation provision).

Net income available for common shareholders was $32.7 million and earnings per diluted share was $0.53 for fourth quarter 2010 versus $31.8 million and $0.52, respectively, for fourth quarter 2009 ($27.1 million or $0.44 per diluted share as adjusted for litigation provision). For the year ending December 31, 2010, Federal Realty reported net income available for common shareholders of $122.2 million and earnings per diluted share of $1.98. This compares to net income available for shareholders of $97.8 million and earnings per diluted share of $1.63 for the year ending December 31, 2009 ($114.1 million or $1.90 per diluted share as adjusted for litigation provision).

Federal Realty's as adjusted financial results in the prior year exclude a $16.4 million litigation provision in 2009 (principally consisting of $20.6 million recorded in the first quarter and a reversal of $4.7 million recorded in the fourth quarter) reflecting the impact of a previously disclosed lawsuit involving a property adjacent to Santana Row. In February 2011, a final ruling on appeals from both Federal Realty and the plaintiff was issued, rejecting both appeals and affirming the final judgment. Payment is expected to be made on the judgment in first quarter 2011 with no further impact expected. See Note 8 of the Consolidated Financial Statements included in Form 10-K filed on February 15, 2011.

FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance. A reconciliation of FFO to net income is attached to this press release.

Portfolio Results

Same-center property operating income in 2010 increased 2.3% including redevelopments and expansions, and increased 2.1% excluding redevelopments and expansions, compared to 2009. On a quarterly-basis, same-center property operating income in fourth quarter 2010 increased 0.8% including redevelopment and expansionproperties, and increased 1.1% excluding redevelopment and expansionproperties, compared to fourth quarter 2009.

The overall portfolio was 93.9% leased as of December 31, 2010, compared to 93.9% on September 30, 2010 and 94.5% on December 31, 2009. Federal Realty's same-center portfolio was 94.3% leased on December 31, 2010, compared to 94.4% on September 30, 2010 and 94.6% on December 31, 2009.

During fourth quarter 2010, the Trust signed 89 leases for 493,000 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 490,000 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 7%. The average contractual rent on this comparable space for the first year of the new lease is $23.68 per square foot compared to the average contractual rent of $22.11 per square foot for the last year of the prior lease. The previous average contractual rent is calculated by including both the minimum rent and any percentage rent actually paid during the last year of the lease term for the re-leased space. On a GAAP basis (i.e., including the impact of straight-line rents), rent increases per square foot for comparable retail space averaged 15% for fourth quarter 2010.

For all of 2010, Federal Realty signed 312 leases representing 1.5 million square feet of comparable retail space at an average cash-basis contractual rent increase per square foot of 8%, and 18% on a GAAP-basis. The average cash-basis contractual rent on this comparable space for the first year of the new lease is $26.04 per square foot compared to the average cash-basis contractual rent of $24.11 per square foot for the last year of the prior lease. As of December 31, 2010, Federal Realty's average contractual minimum rent for retail and commercial space in its portfolio is $22.77 per square foot, as compared to $22.14 on December 31, 2009.

"Steady, solid, consistent growth from one of the best retail portfolios in the country," commented Donald C. Wood, president and chief executive officer of Federal Realty Investment Trust. "Over the past several years, as the results of most commercial real estate portfolios in the U.S. have swung wildly, our consistency and predictability is especially appreciated. As the economy continues to improve, I would expect the same from Federal Realty."

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees left the regular dividend rate on its common shares unchanged, declaring a regular quarterly cash dividend of $0.67 per share on its common shares, resulting in an indicated annual rate of $2.68 per share. The regular common dividend will be payable on April 15, 2011 to common shareholders of record on March 17, 2011.

Guidance

Federal Realty 2011 guidance for FFO per diluted share remained unchanged at a range of $3.95 to $4.02 and 2011 earnings per diluted share guidance of $2.00 to $2.07. 2011 guidance reflects record expectations for funds from operations per share.

Summary of Other Quarterly Activities and Recent Developments

 

• January 19, 2011 - Acquired Tower Shops, a 372,000 square foot community center on 67 acres in Davie, Florida for $66.1 million. The property has significant opportunity for redevelopment and expansion and is well-positioned with a strong anchor tenant line-up including Ross, TJ Maxx, DSW, Michaels, Old Navy, Best Buy (opening fall 2011) and shadow-anchors Costco and Home Depot. The acquisition of Tower Shops expands the Trust's portfolio in South Florida to 680,000 square feet of retail space which includes Del Mar Village in Boca Raton and Courtyard Shops in Wellington.

 

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 2010 earnings conference call, which is scheduled for February 16, 2011, at 11 a.m. Eastern Standard Time. To participate, please call (866) 788-0540 five to ten minutes prior to the call start time and use the passcode FRT EARNINGS (required). Federal Realty will also provide an online webcast on the Company's web site, www.federalrealty.com, which will remain available for 30 days following the call. A telephone recording of the call will also be available through March 16, 2011, by dialing (888) 286-8010 and using the passcode 46183132.

About Federal Realty

Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management, development, and redevelopment of high quality retail assets. Federal Realty's portfolio (excluding joint venture properties) contains approximately 18.3 million square feet located primarily in strategically selected metropolitan markets in the Northeast, Mid-Atlantic, and California. In addition, the Trust has an ownership interest in approximately 1.0 million square feet of retail space through a joint venture in which the Trust has a 30% interest. Our operating portfolio (excluding joint venture properties) was 93.9% leased to national, regional, and local retailers as of December 31, 2010, with no single tenant accounting for more than approximately 2.6% of annualized base rent. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 43 consecutive years, the longest record in the REIT industry. Federal Realty is an S&P MidCap 400 company and its shares are traded on the NYSE under the symbol FRT.

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. These factors include, but are not limited to, the risk factors described in our Annual Report on Form 10-K filed on February 15, 2011, and include the following:

 

• risks that our tenants will not pay rent, may vacate early or may file for bankruptcy or that we may be unable to renew leases or re-let space at favorable rents as leases expire;
• risks that we may not be able to proceed with or obtain necessary approvals for any redevelopment or renovation project, and that completion of anticipated or ongoing property redevelopments or renovations may cost more, take more time to complete, or fail to perform as expected;
• risks that the number of properties we acquire for our own account, and therefore the amount of capital we invest in acquisitions, may be impacted by our real estate partnership;
• risks normally associated with the real estate industry, including risks that occupancy levels at our properties and the amount of rent that we receive from our properties may be lower than expected, that new acquisitions may fail to perform as expected, that competition for acquisitions could result in increased prices for acquisitions, that environmental issues may develop at our properties and result in unanticipated costs, and, because real estate is illiquid, that we may not be able to sell properties when appropriate;
• risks that our growth will be limited if we cannot obtain additional capital;
• 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 limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would result in increased interest expense; and
• risks related to our status as a real estate investment trust, commonly referred to as a REIT, for federal income tax purposes, such as the existence of complex tax 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.

 

Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this press release. Except as may be required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events or otherwise. You should carefully review the risks and risk factors included in our Annual Report on Form 10-K filed February 15, 2011.

Investor and Media Inquiries
Gina Birdsall	Janelle Stevenson
Investor Relations	Corporate Communications
301/998-8265	301/998-8185
gbirdsall@federalrealty.com	jmstevenson@federalrealty.com

Federal Realty Investment Trust
Summarized Balance Sheets
December 31, 2010
	December 31,
	2010		2009
	(in thousands)
ASSETS
Real estate, at cost
Operating (including $97,157 and $68,643 of consolidated variable interest entities,
respectively)	$ 3,726,223		$ 3,619,562
Construction-in-progress	163,200		132,758
Assets held for sale (discontinued operations)	6,519		6,914
	3,895,942		3,759,234
Less accumulated depreciation and amortization (including $4,431 and $3,053 of
consolidated variable interest entities, respectively)	(1,035,204)		(938,087)
Net real estate	2,860,738		2,821,147
Cash and cash equivalents	15,797		135,389
Accounts and notes receivable, net	68,997		72,191
Mortgage notes receivable, net	44,813		48,336
Investment in real estate partnerships	51,606		35,633
Prepaid expenses and other assets	117,602		109,613
TOTAL ASSETS	$ 3,159,553		$ 3,222,309
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable and capital lease obligations (including $22,785 and $23,417
of consolidated variable interest entities, respectively)	$ 589,441		$ 601,884
Notes payable	97,881		261,745
Senior notes and debentures	1,079,827		930,219
Accounts payable and other liabilities	211,274		219,398
Total liabilities	1,978,423		2,013,246
Shareholders' equity
Preferred shares	9,997		9,997
Common shares and other shareholders' equity	1,139,836		1,167,340
Total shareholders' equity of the Trust	1,149,833		1,177,337
Noncontrolling interests	31,297		31,726
Total shareholders' equity	1,181,130		1,209,063
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 3,159,553		$ 3,222,309

Federal Realty Investment Trust
Summarized Income Statements
December 31, 2010
	Three months ended December 31,				Year ended December 31,
	2010		2009		2010		2009
	(in thousands, except per share data)
Revenue
Rental income	$ 134,077		$ 133,573		$ 525,528		$ 512,725
Other property income	3,302		3,588		14,545		12,850
Mortgage interest income	1,369		1,260		4,601		4,943
Total revenue	138,748		138,421		544,674		530,518
Expenses
Rental expenses	28,494		30,580		111,034		108,627
Real estate taxes	13,885		15,019		59,108		58,109
General and administrative	7,127		5,862		24,189		22,032
Litigation provision	(17)		(4,732)		330		16,355
Depreciation and amortization	30,047		28,388		119,539		114,812
Total operating expenses	79,536		75,117		314,200		319,935
Operating income	59,212		63,304		230,474		210,583
Other interest income	23		620		256		1,894
Interest expense	(25,203)		(29,159)		(101,882)		(108,781)
Early extinguishment of debt	-		(1,671)		(2,801)		(2,639)
Income from real estate partnerships	554		248		1,060		1,322
Income from continuing operations	34,586		33,342		127,107		102,379
Discontinued operations
Discontinued operations - (loss) income	(281)		24		(280)		195
Discontinued operations - gain on sale of real estate	-		-		1,000		1,298
Results from discontinued operations	(281)		24		720		1,493
Income before gain on sale of real estate	34,305		33,366		127,827		103,872
Gain on sale of real estate	-		-		410		-
Net income	34,305		33,366		128,237		103,872
Net income attributable to noncontrolling interests	(1,489)		(1,396)		(5,447)		(5,568)
Net income attributable to the Trust	32,816		31,970		122,790		98,304
Dividends on preferred shares	(135)		(135)		(541)		(541)
Net income available for common shareholders	$ 32,681		$ 31,835		$ 122,249		$ 97,763
EARNINGS PER COMMON SHARE, BASIC
Continuing operations	$ 0.53		$ 0.52		$ 1.97		$ 1.60
Discontinued operations	-		-		0.01		0.03
Gain on sale of real estate	-		-		0.01		-
	$ 0.53		$ 0.52		$ 1.99		$ 1.63
Weighted average number of common shares, basic	61,251		61,008		61,182		59,704
EARNINGS PER COMMON SHARE, DILUTED
Continuing operations	$ 0.53		$ 0.52		$ 1.96		$ 1.60
Discontinued operations	-		-		0.01		0.03
Gain on sale of real estate	-		-		0.01		-
	$ 0.53		$ 0.52		$ 1.98		$ 1.63
Weighted average number of common shares, diluted	61,405		61,142		61,324		59,830

Federal Realty Investment Trust
Funds From Operations
December 31, 2010
		Three months ended December 31,				Year ended December 31,
		2010		2009		2010			2009
Funds from Operations available for common		(in thousands, except per share data)
shareholders (FFO) (1)
Net income (2)		$ 34,305		$ 33,366		$ 128,237			$ 103,872
Net income attributable to noncontrolling interests		(1,489)		(1,396)		(5,447)			(5,568)
Gain on sale of real estate		-		-		(1,410)			(1,298)
Depreciation and amortization of real estate assets		26,812		25,423		107,187			103,104
Amortization of initial direct costs of leases		2,326		2,443		9,552			9,821
Depreciation of joint venture real estate assets		435		342		1,499			1,388
Funds from operations		62,389		60,178		239,618			211,319
Dividends on preferred shares		(135)		(135)		(541)			(541)
Income attributable to operating partnership units		244		245		980			974
Income attributable to unvested shares		(259)		(193)		(847)			(687)
FFO		62,239		60,095		239,210			211,065
Litigation provision, net of allocation to unvested shares		(17)		(4,718)		329			16,301
FFO excluding litigation provision		$ 62,222		$ 55,377		$ 239,539		$ 227,366
FFO per diluted share		$ 1.01		$ 0.98		$ 3.88			$ 3.51
Litigation provision per diluted share		-		(0.08)		-			0.27
FFO per diluted share excluding litigation provision		$ 1.01		$ 0.90		$ 3.88			$ 3.78
	Weighted average number of common shares, diluted	61,769		61,513		61,693			60,201
Notes:
(1) See Glossary of Terms.
(2) Net income includes a charge of $0.3 million and $16.4 million in 2010 and 2009, respectively, for adjusting the accrual for litigation regarding a parcel of land adjacent to Santana Row as well as certain costs related to the litigation and appeal process. A final ruling on the appeal was issued in February 2011 rejecting the appeals and affirming the final judgment against us. We believe FFO excluding this litigation provision provides a more meaningful evaluation of operations, and therefore, have included FFO and FFO per share excluding the related charges.

Federal Realty Investment Trust
Reconciliation of Net Income to FFO Guidance
December 31, 2010
	2011 Guidance
	(Dollars in millions except
	per share amounts) (1)
Funds from Operations available for common shareholders (FFO)
Net income	$ 129		$ 134
Net income attributable to noncontrolling interests	(5)		(5)
Gain on sale of real estate	(0)		(0)
Depreciation and amortization of real estate & joint venture real estate assets	112		112
Amortization of initial direct costs of leases	9		9
Funds from operations	245		250
Dividends on preferred shares	(1)		(1)
Income attributable to operating partnership units	1		1
Income attributable to unvested shares	(1)		(1)
FFO	$ 245		$ 249
Weighted average number of common shares, diluted	61.9		61.9
FFO per diluted share	$ 3.95		$ 4.02
Notes:
(1) Individual items may not add up to total due to rounding.

SOURCE Federal Realty Investment Trust