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News Release

Federal Realty Investment Trust Announces Second Quarter 2006 Operating Results

ROCKVILLE, Md., Aug. 2 /PRNewswire-FirstCall/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its second quarter ended June 30, 2006.

  • Funds from operations available for common shareholders (FFO) per diluted share was $0.83 and earnings per diluted common share was $0.66 for the quarter ended June 30, 2006, versus $0.77 and $0.41, respectively, for second quarter 2005.
  • FFO per diluted share was $1.64 and earnings per diluted common share was $1.19 for the six months ended June 30, 2006, versus $1.51 and $0.81, respectively, for the six months ended June 30, 2005.
  • When compared to second quarter 2005, same-center property operating income increased 5.9% including redevelopments and expansions, and 5.6% excluding redevelopments and expansions.
  • Rent increases on lease rollovers for retail space for which there was a prior tenant were 17% on a cash-basis and 25% on a GAAP-basis for the quarter ended June 30, 2006.
  • The Trust's portfolio was 96.7% leased and 94.7% occupied as of June 30, 2006.
  • The common dividend was increased extending the Trust's record of consecutive annual dividend increases to 39 years.
  • Guidance for 2006 FFO per diluted share was narrowed to a range of $3.33 to $3.35.

Financial Results

In second quarter 2006, Federal Realty reported FFO of $44.6 million, or $0.83 per diluted share. This compares to FFO of $41.2 million, or $0.77 per diluted share, reported in second quarter 2005. For the six months ended June 30, 2006, Federal Realty reported FFO of $88.0 million, or $1.64 per diluted share. This compares to FFO of $80.5 million, or $1.51 per diluted share, for the same six-month period in 2005.

Net income available for common shareholders was $35.4 million and earnings per diluted common share was $0.66 for the quarter ended June 30, 2006, versus $21.9 million and $0.41, respectively, for second quarter 2005. Year-to-date, Federal Realty reported net income available for common shareholders of $63.5 million, or $1.19 per diluted share. This compares to net income available for common shareholders of $43.1 million, or $0.81 per diluted share, for the six months ended June 30, 2005.

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

On a same-center basis, including redevelopments and expansions, property operating income increased 5.9% over second quarter 2005. When redevelopments and expansions are excluded from the same-center results, property operating income increased 5.6% from second quarter 2005.

Overall, the Trust's portfolio was 96.7% leased and 94.7% occupied as of June 30, 2006, compared to 95.0% and 91.5%, respectively, on June 30, 2005. Federal Realty's same-center portfolio was 97.7% leased and 96.2% occupied on June 30, 2006, compared to 96.4% and 95.5%, respectively, on June 30, 2005.

During second quarter 2006, the Trust signed 76 leases for approximately 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 276,000 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 17%. The average contractual rent on this comparable space for the first year of the new lease is $24.40 per square foot compared to the average contractual rent of $20.90 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 the 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 25% for second quarter 2006. As of June 30, 2006, Federal Realty's average contractual, cash basis minimum rent for retail and commercial space in its portfolio is $18.95 per square foot.

"Our core properties continue to demonstrate the internal growth that we expect to see from our high quality assets in their strong locations; performance that we expect to continue for the foreseeable future," commented Donald C. Wood, president and chief executive officer of Federal Realty Investment Trust.

Residential condominium sales at Santana Row, Federal Realty's mixed-use community in San Jose, Calif., remain strong. Through July 31, 2006, the Trust had closed sales on 215 units and had four units under contract, with associated gross sales proceeds of $149.2 million and $4.0 million, respectively, which would complete the sale of the 219 units.

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees increased the regular dividend rate on its common shares, declaring a regular quarterly cash dividend of $0.575 per share on its common shares, resulting in an indicated annual rate of $2.30 per share, an increase of $0.08 annually. The regular common dividend will be payable on October 16, 2006, to common shareholders of record as of September 22, 2006. This increase represents the 39th consecutive year that Federal Realty has increased its common dividend, the longest record of consecutive annual dividend increases in the REIT sector.

"We are extremely proud of the company's ability to increase our dividend for the 39th consecutive year," said Wood. "Over the past 39 years, the Trust and the REIT industry have endured many macro- and micro-level issues, and through them all, we have been able to maintain our streak of dividend increases. This is a significant indicator as to the ongoing stability and consistency of our performance."

Additionally, Federal Realty's Board of Trustees declared a regular quarterly cash dividend of $0.53125 per share on the Trust's Series B Cumulative Redeemable Preferred Shares (NYSE: FRTprB). Dividends on the Series B Cumulative Redeemable Preferred Shares will be payable on October 31, 2006, to shareholders of record on October 16, 2006.

Guidance

Federal Realty's guidance for 2006 FFO per diluted share was narrowed to a range of $3.33 to $3.35, and its 2006 earnings per diluted common share guidance increased to a range of $1.97 to $1.99.

Summary of Other Quarterly Activities and Recent Developments

  • July 28, 2006 -- The Trust closed a new $300 million unsecured revolving credit facility to replace its existing $300 million unsecured revolving credit facility, which was scheduled to mature on October 7, 2006.
  • July 17, 2006 -- The Trust closed a $250 million senior unsecured note offering comprised of a $130 million tranche due January 2017 with a 6.20% coupon, and a $120 million tranche due July 2012 with a 6.00% coupon.
  • July 11, 2006 -- Federal Realty announced the appointment of Gail P. Steinel, executive vice president of BearingPoint Inc., to Federal Realty's board of trustees.
  • June 8, 2006 -- Federal Realty announced the addition of two grocery- anchored shopping centers to the Trust's joint venture with Clarion Lion Properties Fund. Barcroft Plaza is located in the Washington, D.C. metropolitan area and was acquired for $25.1 million in an off-market transaction. In addition, Greenlawn Plaza, a property that the Trust acquired in 2000, was contributed to the venture. This redeveloped and stabilized property was also acquired in an off-market transaction and valued at $20.4 million when it was contributed to the venture.
  • May 3, 2006 -- Federal Realty announced that its Board of Trustees has declared a regular quarterly cash dividend of $0.555 per share on its common shares, resulting in an indicated annual dividend rate of $2.22 per share.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its second quarter 2006 earnings conference call, which is scheduled for August 3, 2006, at 11 a.m. Eastern Daylight Time. 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, http://www.federalrealty.com, which will remain available for 30 days following the call. A telephone recording of the call will also be available through September 4, 2006, by dialing (866) 448-4809.

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 17.7 million square feet located primarily in strategic metropolitan markets in the Northeast, Mid-Atlantic, and California. In addition, the Trust has an ownership interest in approximately 0.7 million square feet of retail space through its joint venture with Clarion Lion Properties Fund in which the Trust has a 30% interest. Our operating portfolio (excluding joint venture properties) was 96.7% leased to national, regional, and local retailers as of June 30, 2006, 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 39 consecutive years, the longest record in the REIT industry. Shares of Federal Realty 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 most recent annual report on Form 10-K (as amended), and include the following:

  • risks that our tenants will not pay rent 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 we may not be able to sell the condominium units at Santana Row for the expected prices or within the anticipated time frames;
  • 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 most current annual report on Form 10-K (as amended) and our quarterly reports on Form 10-Q.



    Federal Realty Investment Trust
    Summarized Operating Results
    June 30, 2006


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

                                       Three months ended   Six months ended
    CONSOLIDATED OPERATING RESULTS          June 30,            June 30,
                                         2006      2005     2006      2005
    Revenue
       Rental income                    $105,533  $95,762  $210,498  $193,545
       Other property income               1,862    2,042     3,956     3,970
       Mortgage interest income            1,349    1,449     2,671     2,730
                                         108,744   99,253   217,125   200,245
    Expenses
       Rental                             20,265   19,401    42,329    42,446
       Real estate taxes                  10,525    8,705    21,076    18,273
       General and administrative          4,981    4,982     9,483     9,484
       Depreciation and amortization      24,172   22,242    48,078    44,038
                                          59,943   55,330   120,966   114,241
       Operating income                   48,801   43,923    96,159    86,004

    Other interest income                    331    1,301       593     1,693
    Interest expense                     (24,754) (21,827)  (49,034)  (43,890)
    Income from real estate partnership      190      153       338       224
    Minority interests                    (1,324)  (1,279)   (2,397)   (2,795)
    Income from continuing operations     23,244   22,271    45,659    41,236

    Discontinued operations
       Loss from discontinued operations     (22)  (1,066)     (143)     (316)
       Gain on sale of real estate        15,034    3,602    23,771     7,884
    Results from discontinued operations  15,012    2,536    23,628     7,568

    Net Income                            38,256   24,807    69,287    48,804

    Dividends on preferred stock          (2,869)  (2,869)   (5,738)   (5,738)
    Net income available for common
     shareholders                        $35,387  $21,938   $63,549   $43,066



    FUNDS FROM OPERATIONS AVAILABLE FOR
     COMMON SHAREHOLDERS
    Net income                           $38,256  $24,807   $69,287   $48,804
    Gain on sale of real estate          (15,034)  (3,602)  (23,771)   (7,884)
    Depreciation and amortization of
     real estate assets                   22,010   20,735    43,884    41,253
    Amortization of initial direct
     costs of leases                       1,825    1,802     3,564     3,428
    Depreciation of real estate
     partnership assets                      151      157       315       314
    Funds from operations                 47,208   43,899    93,279    85,915
    Dividends on preferred stock          (2,869)  (2,869)   (5,738)   (5,738)
    Income attributable to operating
     partnership units                       245      194       478       352
    Funds from operations available for
     common shareholders                 $44,584  $41,224   $88,019   $80,529


    Weighted average number of common
     shares, diluted                      53,710   53,408    53,688    53,305

    Funds from operations available for
     common shareholders per diluted
     share                                 $0.83    $0.77     $1.64     $1.51

    EARNINGS PER COMMON SHARE, BASIC
    Continuing operations                  $0.39    $0.37     $0.75     $0.68
    Discontinued operations                 0.28     0.05      0.45      0.14
                                           $0.67    $0.42     $1.20     $0.82

    Weighted average number of common
     shares, basic                        52,842   52,454    52,789    52,333

    EARNINGS PER COMMON SHARE, DILUTED
    Continuing operations                  $0.38    $0.36     $0.75     $0.67
    Discontinued operations                 0.28     0.05      0.44      0.14
                                           $0.66    $0.41     $1.19     $0.81

    Weighted average number of common
     shares, diluted                      53,315   52,986    53,287    52,876



    Federal Realty Investment Trust
    Summarized Balance Sheets
    June 30, 2006


                              Financial Highlights
                                 (in thousands)

    CONSOLIDATED BALANCE SHEETS
                                                June 30,        December 31,
                                                  2006              2005
    ASSETS

    Real estate, at cost
        Operating                               $2,790,717        $2,731,694
        Construction-in-progress                    58,334            50,593
        Discontinued operations                      3,645            47,034
                                                 2,852,696         2,829,321
    Less accumulated depreciation and
     amortization                                 (696,691)         (663,750)
    Net real estate                              2,156,005         2,165,571

    Cash and cash equivalents                       14,042             8,639
    Accounts and notes receivable                   38,659            38,161
    Mortgage notes receivable                       40,796            40,531
    Investment in real estate partnership           10,641             9,375
    Other assets                                    88,326            88,575
    TOTAL ASSETS                                $2,348,469        $2,350,852

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Liabilities
        Obligations under capital leases and
         mortgage notes                           $417,189          $419,713
        Notes payable                              363,119           316,755
        Senior notes and debentures                613,458           653,675
        Other liabilities                          158,159           166,669
    Total liabilities                            1,551,925         1,556,812

    Minority interests                              19,215            19,193

    Shareholders' equity
        Preferred stock                            135,000           135,000
        Common shares and other shareholders'
         equity                                    642,329           639,847
    Total shareholders' equity                     777,329           774,847
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $2,348,469        $2,350,852



    Federal Realty Investment Trust
    Reconciliation of 2006 Net Income to 2006 FFO Guidance
    June 30, 2006


                                                    2006 Guidance
                                             ($ millions except per share
                                                     amounts) (1)

    Net income                                   $118      to       $119
    Gain on sale of real estate                   (24)               (24)
    Depreciation and amortization of real
     estate & joint venture assets                 89                 89
    Amortization of initial direct costs of
     leases                                         7                  7
    Funds from operations                         190                191
    Income attributable to operating
     partnership units                              1                  1
    Dividends on preferred stock                  (11)               (11)
    Funds from operations available for
     common shareholders                          179      to        180

    Weighted Average Shares (diluted)            53.9

    Funds from operations available for
     common shareholders per diluted share      $3.33              $3.35


    Note:
   (1) Individual items may not add up to total due to rounding.

CONTACT: Investor and Media Inquiries: Andrew Blocher, Vice President, Capital Markets & Investor Relations, +1-301-998-8166, ablocher@federalrealty.com, or Suzanne O'Neill, Manager, Investor Relations, +1-301-998-8358, soneill@federalrealty.com, both of Federal Realty Investment Trust.

SOURCE Federal Realty Investment Trust