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News Release

Federal Realty Investment Trust Announces Second Quarter 2003 Operating Results

ROCKVILLE, Md.--(BUSINESS WIRE)--July 30, 2003--Federal Realty Investment Trust (NYSE:FRT) today reported operating results for the quarter ended June 30, 2003.

  • Funds from operations (FFO) was $0.64 per diluted share for the second quarter and the Trust today reconfirmed its previous 2003 FFO per diluted share forecast of $2.60.
  • Second quarter 2003 net income per diluted share was $0.29.
  • When compared to second quarter 2002, same-center property operating income increased 4.0% excluding properties redeveloped or expanded, and 4.8% when redevelopments and expansions are included.
  • Cash rent increases on lease rollovers were 15% for the second quarter on 254,000 square feet of comparable retail space.
  • At Santana Row, 93% of the residential units and 81% of the Phase I retail square footage was leased as of July 25, 2003.

Financial Results

Federal Realty reported FFO of $31.1 million for the second quarter of 2003, or $0.64 per diluted share. This compares to FFO of $27.7 million for the second quarter of 2002, or $0.66 per diluted share. Declines in FFO from second quarter 2002 to second quarter 2003 were attributable to Santana Row coming online. Net income available for common shareholders was $13.6 million, or $0.29 per diluted share for the quarter ended June 30, 2003. For the second quarter of 2002, the Trust reported net income available for common shareholders of $30.5 million, or $0.74 per diluted share, which included a $19.1 million, or $0.46 per diluted share, gain on the sale of real estate.

Portfolio Results

On a same-center basis, excluding properties redeveloped or expanded, property operating income increased 4.0% over second quarter 2002. When properties redeveloped or expanded are included in the same-center results, property operating income increased 4.8% from second quarter 2002. As of June 30, 2003, retail occupancy on a same-center basis declined, as expected, to 94.8% compared to 95.9% on June 30, 2002, and 95.8% on March 31, 2003, due primarily to the Kmart bankruptcy-related store closings at Leesburg and Flourtown, as previously announced. Same-center occupancy, as of June 30, 2003, excludes the 444,000 square feet of retail space in Phase I of Santana Row and the 472,000 square feet of retail space in South Valley Shopping Center and Mount Vernon Plaza, properties acquired late in the first quarter. Overall occupancy was 93.1% as of June 30, 2003, compared to 96.0% on June 30, 2002, and 94.3% on March 31, 2003.

"We're pleased with the progress we've made at Santana Row and the further strengthening of our balance sheet in the second quarter," stated Donald C. Wood, Federal Realty's President and Chief Executive Officer. "We're looking forward to redeveloping and re-leasing the sections of those shopping centers impacted by the Kmart and other anchor vacancies and are confident in our ability to create incremental value when these redevelopments are complete. This value creation is only possible because of the strong retailer demand for space at these properties."

During the second quarter, the Trust signed 78 leases for over 325,000 square feet of retail space. On a comparable space basis (i.e. spaces for which there was a former tenant), the Trust leased 254,000 square feet at an average cash-basis contractual rent increase per square foot (i.e. excluding the impact of straight-line rents) of 15%. The weighted-average contractual rent on this comparable space for the first year of the new lease was $21.06 per square foot compared to the weighted-average contractual rent of $18.30 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. On a GAAP basis, rent increases per square foot were 25% on the 254,000 square feet of comparable space re-leased during the second quarter. As of June 30, 2003, Federal Realty's weighted-average contractual rent for retail space in its portfolio was $17.35 per square foot.

Santana Row

Tenant sales performance continues to improve at Santana Row, the Trust's mixed-use community in San Jose, Calif., as awareness of the project grows and consumer shopping patterns become established. As of July 25, 2003, 81% of the Phase I retail space was leased with 80 tenants open and operating, representing 65% of the available retail space. In comparison, on May 5, 2003, Santana Row's Phase I retail space was 75% leased with 68 tenants open, representing 57% of the available retail space. The Trust also has made significant progress in leasing the residential component of Santana Row. As of July 25, 2003, the Phase I residential units were 93% leased and 85% occupied. By comparison, as of May 5, 2003, these units were 72% leased and 66% occupied, and as of February 4, 2003, they were 45% leased and 35% occupied. In addition, Hotel Valencia Santana Row, the 213-room boutique hotel operated by the Valencia Group, opened for business in June 2003.

Guidance

Federal Realty today reconfirmed previous expectations for 2003 FFO per diluted share of $2.60 and increased net income per diluted share expectations to $1.03.

Summary of Other Quarterly Activities and Recent Developments

  • On June 23, 2003, Federal Realty redeemed its $75 million 5 1/4% Convertible Subordinated Debentures, due October 28, 2003. The debentures were redeemed at 100% of the principal amount plus accrued interest to the redemption date.
  • On June 13, 2003, Federal Realty redeemed all 4 million outstanding shares of its 7.95% Series A Cumulative Redeemable Preferred Shares at their redemption price of $25.00 per share, plus accrued and unpaid dividends through the redemption date of $0.23959 per share.
  • On May 14, 2003, Federal Realty sold 3.2 million common shares of beneficial interest in a public offering underwritten by Wachovia Securities. The sale generated $98.6 million of proceeds to the Trust before offering expenses, including the underwriter's full exercise of its over-allotment option, or $30.457 per share, representing a 3.25% discount from the previous day's New York Stock Exchange closing price of $31.48.
  • On April 23, 2003, the Trust provided updated information relating to the status of its three Kmart locations, comprising 326,000 square feet of retail space and $1.7 million of contractual rent, that were closed as a result of the retailer's Chapter 11 bankruptcy filing. Kohl's Corporation has assumed the previous lease for the 150,000 square foot store at Fresh Meadows in Queens, N.Y. The leases for the Kmart locations at both Flourtown Shopping Center in Flourtown, Pa., and Leesburg Plaza in Leesburg, Va., represented a combined 1.1% of portfolio occupancy and 0.15% of annualized revenues. The Trust has reclaimed both of these spaces and management believes both properties provide potential for increased earnings and increased value through redevelopment or re-tenanting.
  • On April 16, 2003, Federal Realty announced the appointment of David Faeder, Vice Chairman of Sunrise Assisted Living, Inc. (NYSE:SRZ), to serve on the Trust's board of trustees. Mr. Faeder also has been appointed to serve on the Trust's audit committee and has been designated by the Board as the Trust's "audit committee financial expert." Mr. Faeder will stand for election by the Trust's shareholders at the 2004 Annual Meeting of Shareholders.
  • On April 1, 2003, Federal Realty announced the acquisition of South Valley Shopping Center and Mount Vernon Plaza in Fairfax County, Va. The shopping centers are adjacent to one another on the west side of Route 1, approximately three miles south of the Capital Beltway, and were acquired from unrelated, private owners. The Trust purchased the fee interest in South Valley Shopping Center for approximately $13.7 million in an all cash transaction and acquired the leasehold interest with a purchase option in Mount Vernon Plaza for aggregate consideration of approximately $17.5 million in the form of cash, down-REIT partnership units and the assumption of debt. Management believes that both properties have significant potential for future re-leasing and redevelopment.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter earnings conference call, which is scheduled for Thursday, July 31, 2003, at 11 a.m. EDT. To participate, please call (800) 857-7003 five to ten minutes prior to the 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 (800) 925-2730.

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 15.7 million square feet located in major metropolitan markets across the United States. The operating portfolio is currently over 93% occupied by over 2,000 national, regional, and local retailers with no single tenant accounting for more than 2.5% 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 35 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 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
Income Statement
June 30, 2003
----------------------------------------------------------------------

                         Financial Highlights
                (in thousands, except per share data)
                             (unaudited)

                                Three Months Ended   Six Months Ended
                                     June 30,            June 30,
OPERATING RESULTS                2003      2002      2003      2002
---------------------------------------- --------- --------- ---------

Revenues
   Rental income                $80,564   $71,450  $160,555  $141,932
   Other property income          4,186     3,505     8,281     6,981
   Interest and other income      1,659       857     2,874     2,118
                               --------- --------- --------- ---------
                                 86,409    75,812   171,710   151,031
Expenses
   Rental                        19,282    16,443    40,978    31,813
   Real estate taxes              8,888     7,445    16,743    15,181
                               --------- --------- --------- ---------
Total property operating
 expenses                        28,170    23,888    57,721    46,994
                               --------- --------- --------- ---------

Property operating income        58,239    51,924   113,989   104,037

   Interest                      18,252    15,133    35,831    31,773
   Administrative                 3,147     3,497     6,421     6,496
   Restructuring expenses             -         -         -     8,489
   Depreciation and
    amortization                 18,125    15,920    35,572    31,738
                               --------- --------- --------- ---------
Total other expenses             39,524    34,550    77,824    78,496
                               --------- --------- --------- ---------
   Operating income before
    investors' share of
    operations and discontinued
    operations                   18,715    17,374    36,165    25,541
   Investors' share of
    operations                   (1,134)   (1,579)   (2,204)   (2,276)
                               --------- --------- --------- ---------
   Income before gain on sale
    of real estate net of loss
    on abandoned developments
    held for sale and
    discontinued operations      17,581    15,795    33,961    23,265
   Income (loss) from
    operations of discontinued
    assets                           (6)      439       (10)    1,285
                               --------- --------- --------- ---------
   Income before gain on sale
    of real estate net of loss
    on abandoned developments
    held for sale                17,575    16,234    33,951    24,550
   Gain on sale of real estate
    net of loss on abandoned
    developments held for sale      551    19,101       551     9,454
                               --------- --------- --------- ---------
           Net income            18,126    35,335    34,502    34,004
   Dividends on preferred stock  (4,490)   (4,856)   (9,346)   (9,712)
                               --------- --------- --------- ---------
           Net income available
            for common
            shareholders        $13,636   $30,479   $25,156   $24,292
                               ========= ========= ========= =========

Funds from Operations
   Net income available for
    common shareholders         $13,636   $30,479   $25,156   $24,292
   Gain on sale of real
    estate net of loss on
    abandoned developments
    held for sale                  (551)  (19,101)     (551)   (9,454)
   Depreciation and amortization
    of real estate assets        16,363    14,521    32,161    29,058
   Amortization of initial
    direct costs of leases        1,392     1,200     2,746     2,371
   Income attributable to
    operating partnership units     235       650       441       514
                               --------- --------- --------- ---------
   Funds from operations        $31,075   $27,749   $59,953   $46,781
                               ========= ========= ========= =========
     Weighted average number of
      common shares, diluted     48,376    42,136    46,876    41,568
                               ========= ========= ========= =========
   Funds from operations per
    share                         $0.64     $0.66     $1.28     $1.13
                               ========= ========= ========= =========

   Funds from operations        $31,075   $27,749   $59,953   $46,781
   Add back restructuring
    expense                           -         -         -     8,489
                               --------- --------- --------- ---------
   Adjusted funds from
    operations                  $31,075   $27,749   $59,953   $55,270
                               ========= ========= ========= =========

Earnings per common share,
 basic
   Income before gain on
    sale of real estate net
    of loss on abandoned
    developments held for
    sale and discontinued
    operations                    $0.28     $0.27     $0.54     $0.34
   Discontinued operations            -      0.01         -      0.03
   Gain on sale of real
    estate net of loss on
    abandoned developments
    held for sale                  0.01      0.47      0.01      0.23
                               --------- --------- --------- ---------
                                  $0.29     $0.75     $0.55     $0.60
                               ========= ========= ========= =========
      Weighted average
       number of common
       shares, basic             47,161    40,798    45,726    40,286
                               ========= ========= ========= =========

Earnings per common share,
 diluted
   Income before gain on
    sale of real estate net
    of loss on abandoned
    developments held for
    sale and discontinued
    operations                    $0.28     $0.27     $0.54     $0.34
   Discontinued operations            -      0.01         -      0.03
   Gain on sale of real
    estate net of loss on
    abandoned developments
    held for sale                  0.01      0.46      0.01      0.23
                               --------- --------- --------- ---------
                                  $0.29     $0.74     $0.55     $0.60
                               ========= ========= ========= =========
      Weighted average
       number of common
       shares, diluted           48,376    42,136    46,876    41,568
                               ========= ========= ========= =========


Federal Realty Investment Trust
Balance Sheet
June 30, 2003
----------------------------------------------------------------------

                         Financial Highlights
                            (in thousands)

BALANCE SHEET DATA                              June 30,     December
------------------                                2003       31, 2002
                                               ----------- -----------
Assets                                         (unaudited)

Real estate, at cost
   Operating                                   $2,141,958  $1,966,338
   Development                                    226,789     340,488
                                               ----------- -----------
                                                2,368,747   2,306,826
   Less accumulated depreciation and
    amortization                                 (482,758)   (450,697)
                                               ----------- -----------
                                                1,885,989   1,856,129
Other Assets
   Mortgage notes receivable                       37,994      35,577
   Cash and investments                            18,609      23,123
   Receivables                                     22,858      18,722
   Insurance reimbursement receivable              16,400           -
   Other assets                                    68,618      65,827
                                               ----------- -----------
Total Assets                                   $2,050,468  $1,999,378
                                               =========== ===========

Liabilities and Shareholders' Equity

   Obligations under capital leases, mortgages
    and construction loans                       $355,175    $383,812
   Notes payable                                  343,625     207,711
   Senior notes                                   535,000     535,000
   5 1/4% Convertible subordinated debentures           -      75,000
   Other liabilities                              138,261     153,568
                                               ----------- -----------
Total Liabilities                               1,372,061   1,355,091

Preferred stock                                   135,000     235,000

Common Shares and Other Shareholders' Equity      543,407     409,287
                                               ----------- -----------
Total Liabilities and Shareholders' Equity     $2,050,468  $1,999,378
                                               =========== ===========

CONTACT:
Federal Realty Investment Trust
Investor Inquiries:
Andrew Blocher
Vice President, Capital Markets & Investor Relations
301/998-8166
ablocher@federalrealty.com
or
Federal Realty Investment Trust
Media Inquiries:
Kristine Warner
Director, Corporate Communications
301/998-8212
kwarner@federalrealty.com

SOURCE: Federal Realty Investment Trust