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- Press Release
Federal Realty Investment Trust Announces Third Quarter 2003 Operating Results; Board of Trustees Approves Residential Rebuild on Santana Row's Building 7
Federal Realty Investment Trust Announces Third Quarter 2003 Operating Results; Board of Trustees Approves Residential Rebuild on Santana Row's Building 7
ROCKVILLE, Md.--(BUSINESS WIRE)--Nov. 3, 2003--Federal Realty Investment Trust (NYSE:FRT) today reported operating results for the quarter ended September 30, 2003.
-- Funds from operations (FFO) was $0.66 per diluted share for
the third quarter and net income per diluted share was $0.44.
-- When compared to third quarter 2002, same-center property
operating income increased 3.1% excluding redevelopment or
expansion properties, and 4.1% when redevelopments and
expansions are included.
-- Cash rent increases on lease rollovers were 14% for the third
quarter on 408,000 square feet of comparable retail space.
-- At Santana Row, 96% of the residential units and 85% of the
Phase I retail square footage were leased as of October 23,
2003.
-- Through October 31, 2003, the Trust acquired four shopping
center assets (committing a total of $125.5 million of
capital) and completed five dispositions generating net
proceeds of $29.0 million.
Financial Results
Federal Realty reported FFO of $33.3 million for the third quarter of 2003, or $0.66 per diluted share. This compares to FFO of $29.7 million for the third quarter of 2002, or $0.67 per diluted share. Net income available for common shareholders was $21.7 million, or $0.44 per diluted share for the quarter ended September 30, 2003. For the third quarter of 2002, the Trust reported net income available for common shareholders of $13.6 million, or $0.31 per diluted share.
Portfolio Results
On a same-center basis, excluding redevelopment or expansion properties, property operating income increased 3.1% over third quarter 2002. When redevelopment or expansion properties are included in the same-center results, property operating income increased 4.1% from third quarter 2002. As of September 30, 2003, retail occupancy on a same-center basis was 95.2% compared to 94.8% on June 30, 2003, and 95.5% on September 30, 2002. Overall occupancy was 93.9% as of September 30, 2003, compared to 93.1% on June 30, 2003, and 95.5% on September 30, 2002.
During the third quarter, the Trust signed 84 leases for over 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 408,000 square feet at an average cash-basis contractual rent increase per square foot (i.e. excluding the impact of straight-line rents) of 14%. The weighted-average contractual rent on this comparable space for the first year of the new lease was $17.56 per square foot compared to the weighted-average contractual rent of $15.36 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 the first nine months of 2003, Federal Realty has leased over 1 million square feet of comparable retail space at an average contractual rent increase of 16%. On a GAAP basis (i.e. including the impact of straight-line rents), rent increases per square foot were 24% on the 408,000 square feet of comparable space re-leased during the third quarter, and 27% year-to-date. As of September 30, 2003, Federal Realty's weighted-average contractual rent for retail space in its portfolio was $17.49 per square foot.
"We met or exceeded third quarter expectations for each of our key production and financial measures, including leasing, occupancy and earnings," stated Donald C. Wood, Federal Realty's President and Chief Executive Officer. "In addition, we have effectively recycled capital from slower growth assets, including Greenwich Avenue and Coolidge Corner, into higher growth assets, such as Mercer Mall and Plaza del Mercado, as well as a growing number of value-added redevelopment opportunities in our existing portfolio."
Santana Row
At Santana Row, Federal Realty's mixed-use community in San Jose, Calif., 85% of the Phase I retail space was leased as of October 23, 2003, with 90 tenants open and operating, representing 73% of the available Phase I retail space as of that date. In comparison, on July 25, 2003, Santana Row's Phase I retail space was 81% leased with 80 tenants open, representing 65% of the available retail space. The Container Store, a 32,000 square foot component of Santana Row Phase II opened for business on October 23, ahead of schedule, and Best Buy remains on schedule to open on November 7.
With respect to the residential component of Santana Row, 96% of the 255, Phase I residential units were leased as of October 23, 2003. As a result of continued strong demand for residential units at Santana Row, the Trust's Board of Trustees recently approved the development of 96 townhomes and 160 flats on the Building 7 podium to replace the units that were destroyed in the August, 2002 fire. Construction is expected to commence shortly, with delivery of the first units expected in early 2005 with the balance delivered later in that year. The Trust will invest nearly $60 million of incremental capital to complete the residential development, and expects to earn an unleveraged return of at least 10.5% on its incremental investment upon stabilization in 2006.
"Phase II of Santana Row, which was 95% pre-leased to Best Buy and The Container Store, is coming on line ahead of schedule, under budget, and above our projected returns," said Mr. Wood. "Using the knowledge we've gained from the lease-up of the 255 residential units in Phase I, and an extensive redesign with a focus on cost, we are confident in our ability to develop these new 256 units on time, on budget and at attractive incremental returns."
Guidance
Federal Realty today reconfirmed previous expectations for 2003 FFO per diluted share of $2.60, before the impact of the $3.4 million (or $0.07 per diluted share) change in accounting related to the redemption of preferred shares in the second quarter pursuant to EITF Issue D-42, and increased net income per diluted share expectations to $1.26. In addition, the Trust provided initial guidance for 2004 FFO per diluted share of between $2.72 and $2.76, or $1.06 to $1.10 of net income per diluted share.
"We're thrilled to return to positive FFO growth for the first time since 2001," said Larry E. Finger, Federal Realty's Senior Vice President and Chief Financial Officer. "This demonstrates the quality of our portfolio and the successful execution of our plan."
Summary of Other Quarterly Activities and Recent Developments
-- November 3, 2003 - Federal Realty announced the acquisition of
Plaza del Mercado, an approximately 96,000 square foot
shopping center in Silver Spring, Md. anchored by a CVS
Pharmacy and an undersized Giant Food. The Trust acquired the
fee interest in the shopping center for $20.0 million in cash
in an off-market transaction, representing a capitalization
rate of 8.1% based on management's estimate of projected,
cash-basis property operating income over the next 12 months.
Redevelopment opportunities, which include a potential grocer
expansion and additional gross leaseable area, are projected
to increase the yield and value of the property in the next
few years, subject to entitlement, leasing and redevelopment
risk. In addition, Federal Realty announced the sale of 234
Greenwich Avenue, a 15,000 square foot street retail asset,
for $7.95 million, which represented a 5.97% capitalization
rate based on management's estimate of projected, cash-basis
property operating income over the next 12 months.
-- October 15, 2003 - Federal Realty announced the acquisition of
Mercer Mall, a community shopping center in Mercer County,
N.J. The Trust entered into a master lease for the 390,000
square foot primary portion of the shopping center, and
acquired a fee interest in 20,000 additional square feet of
the Property. The Property is currently 80% occupied, and has
significant redevelopment opportunities including the lease-up
of vacant anchor spaces, the addition of gross leaseable area,
and an upgrade of common areas and facades. Federal Realty
expects to increase the yield and value of the property
through a redevelopment and expansion of Mercer Mall, subject
to entitlement, leasing and redevelopment risk.
-- October 8, 2003 - The Trust closed and funded a new $550
million unsecured credit facility. The new facility,
consisting of a $100 million three-year term loan, a $150
million five-year term loan and a $300 million revolving
credit facility, replaced Federal Realty's $300 million
revolving credit facility and $125 million term loan, both of
which were scheduled to expire on December 19, 2003.
-- September 16, 2003 - Federal Realty announced the sale of
Coolidge Corner, a 13,000 square foot Street Retail building
in Brookline, Mass., and a 17.7-acre land parcel in Hillsboro,
Ore. The sales price for Coolidge Corner represented a 7.4%
capitalization rate based on management's estimate of
projected, cash-basis property operating income over the next
12 months. The Trust projected Coolidge Corner would generate
a growth rate in annualized property operating income well
below Federal Realty's expectations for its portfolio.
Together, the sales generated combined net proceeds of $17.3
million for the Trust.
-- August 11, 2003 - Federal Realty announced that its Board of
Trustees increased the common dividend to $0.49 per common
share, marking the 36th consecutive year that the Trust has
increased its common dividend, the longest such record in the
REIT sector.
Conference Call Information
Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter earnings conference call, which is scheduled for Tuesday, November 4, 2003, at 1 p.m. EST. To participate, please call (800) 857-7003 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 (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 16.2 million square feet located primarily in strategic metropolitan markets in the Northeast, Mid-Atlantic, and Western United States. The operating portfolio was 94% occupied by over 2,000 national, regional, and local retailers as of September 30, 2003, 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 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;
-- risk of delay and cost overruns in construction of the
residential units on Building 7;
-- risks that we will be unable to lease the new residential
units on Building 7 at the rates, or as quickly, as we have
projected;
-- risks that the costs of operating the residential units on
Building 7, including real estate taxes and insurance, will be
higher than anticipated;
-- risks that we may not proceed or obtain necessary approvals
for any redevelopment of Plaza del Mercado or Mercer Mall, and
that any redevelopment or expansion that we do pursue may not
perform as anticipated;
-- 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
Income Statement
September 30, 2003
----------------------------------------------------------------------
Financial Highlights
(in thousands, except per share data)
(unaudited)
Three Months Nine Months
Ended Ended
September 30, September 30,
OPERATING RESULTS 2003 2002 2003 2002
---------------------------- ------- ------- -------- --------
Revenues
Rental income $81,387 $72,041 $241,482 $213,532
Interest and other income 4,911 4,412 13,191 11,392
Other property income 931 1,644 3,805 3,762
------- ------- -------- --------
87,229 78,097 258,478 228,686
Expenses
Rental 19,126 17,450 60,068 49,196
Real estate taxes 8,998 7,813 25,673 22,917
------- ------- -------- --------
Total property operating expenses 28,124 25,263 85,741 72,113
------- ------- -------- --------
Property operating income 59,105 52,834 172,737 156,573
Interest 18,719 13,540 54,550 45,313
Administrative 3,221 3,713 9,642 10,209
Restructuring expenses - - - 8,489
Depreciation and amortization 18,710 16,037 54,223 47,718
------- ------- -------- --------
Total other expenses 40,650 33,290 118,415 111,729
------- ------- -------- --------
Operating income before minority
interests and discontinued
operations 18,455 19,544 54,322 44,844
Minority interests (1,053) (1,081) (3,257) (3,357)
------- ------- -------- --------
Income from continuing
operations 17,402 18,463 51,065 41,487
Operating income from
discontinued operations 21 41 309 1,567
Gain on sale of real estate net
of loss on abandoned
developments held for sale 7,172 - 7,723 9,454
------- ------- -------- --------
Net income 24,595 18,504 59,097 52,508
Preferred stock redemption -
excess of redemption cost over
carrying value - - (3,423) -
Dividends on preferred stock (2,869) (4,856) (12,215) (14,568)
------- ------- -------- --------
Net income
available for common
shareholders $21,726 $13,648 $43,459 $37,940
======= ======= ======== ========
Funds from Operations
Net income available for
common shareholders $21,726 $13,648 $43,459 $37,940
Gain on sale of real
estate net of loss on
abandoned developments
held for sale (7,172) - (7,723) (9,454)
Depreciation and
amortization of real
estate assets 16,974 14,614 49,146 43,672
Amortization of initial
direct costs of leases 1,427 1,175 4,173 3,546
Income attributable to
operating partnership
units 375 263 816 777
------- ------- -------- --------
Funds from operations
$33,330 $29,700 $89,871 $76,481
======= ======= ======== ========
Weighted average number
of common shares,
diluted 50,216 44,036 48,004 42,421
======= ======= ======== ========
Funds from operations
per share $0.66 $0.67 $1.87 $1.80
======= ======= ======== ========
Earnings per common share,
basic
Income from continuing
operations $0.30 $0.32 $0.76 $0.65
Discontinued operations 0.14 - 0.17 0.27
------- ------- -------- --------
$0.44 $0.32 $0.93 $0.92
======= ======= ======== ========
Weighted average number
of common shares, basic 48,935 42,802 46,810 41,155
======= ======= ======== ========
Earnings per common share,
diluted
Income from continuing
operations $0.30 $0.31 $0.75 $0.65
Discontinued operations 0.14 - 0.17 0.26
------- ------- -------- --------
$0.44 $0.31 $0.92 $0.91
======= ======= ======== ========
Weighted average number
of common shares, diluted 50,216 44,036 48,004 42,421
======= ======= ======== ========
Federal Realty Investment Trust
Balance Sheet
September 30, 2003
----------------------------------------------------------------------
Financial Highlights
(in thousands)
BALANCE SHEET DATA
------------------ September December
30, 31,
2003 2002
----------- -----------
Assets (unaudited)
Real estate, at cost
Operating $2,185,976 $1,966,338
Development 189,572 340,488
----------- -----------
2,375,548 2,306,826
Less accumulated depreciation and
amortization (499,017) (450,697)
----------- -----------
1,876,531 1,856,129
Other Assets
Mortgage notes receivable 33,656 35,577
Cash and investments 38,013 23,123
Receivables 23,487 18,722
Other assets 72,357 65,827
----------- -----------
Total Assets $2,044,044 $1,999,378
=========== ===========
Liabilities and Shareholders' Equity
Obligations under capital leases, mortgages
and construction loans $354,914 $383,812
Notes payable 334,609 207,711
Senior notes 535,000 535,000
5 1/4% Convertible subordinated debentures - 75,000
Other liabilities 139,630 153,568
----------- -----------
Total Liabilities 1,364,153 1,355,091
Preferred stock 135,000 235,000
Common Shares and Other Shareholders' Equity 544,891 409,287
----------- -----------
Total Liabilities and Shareholders' Equity $2,044,044 $1,999,378
=========== ===========
CONTACT: Federal Realty Investment Trust, Rockville
Investor Inquiries
Andrew Blocher, 301-998-8166
ablocher@federalrealty.com
or
Media Inquiries
Kristine Warner, 301-998-8212
kwarner@federalrealty.com
SOURCE: Federal Realty Investment Trust
