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News Release

Federal Realty Investment Trust Announces Third Quarter 2005 Operating Results

Santana Row Condominium Sales Result in Special Dividend of $0.20 per Common Share

ROCKVILLE, Md., Oct. 31 /PRNewswire-FirstCall/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its third quarter ended September 30, 2005.

  • Funds from operations available for common shareholders (FFO) per diluted share was $0.77 and earnings per common share (diluted) was $0.52 for the quarter ended September 30, 2005.
  • For the nine months ended September 30, 2005, FFO per diluted share was $2.28 and earnings per common share (diluted) was $1.34.
  • When compared to third quarter 2004, same-center property operating income increased 5.3% including redevelopments and expansions, and 5.9% excluding redevelopments and expansions.
  • Rent increases on lease rollovers for retail space for which there was a prior tenant were 20% on a cash-basis and 32% on a GAAP-basis for the quarter ended September 30, 2005.
  • The Trust's portfolio was 95.5% leased as of September 30, 2005.
  • Initial guidance is being provided for 2006 FFO per diluted share of $3.30 to $3.35.
  • Guidance for 2005 FFO per diluted share was increased to a range of $3.05 to $3.06.

Financial Results

Federal Realty reported FFO of $41.0 million, or $0.77 per diluted share, in third quarter 2005. This compares to FFO of $38.3 million, or $0.72 per diluted share, reported in third quarter 2004, which included $0.7 million ($0.01 per diluted share) of insurance recovery for lost income from the Santana Row fire. For the nine months ended September 30, 2005, Federal Realty reported FFO of $121.5 million, or $2.28 per diluted share. This compares to FFO of $111.7 million, or $2.14 per diluted share, for the same nine-month period in 2004, which included $2.8 million ($0.05 per diluted share) of Santana Row insurance proceeds.

Net income available for common shareholders was $27.8 million, and earnings per common share (diluted) was $0.52 for the quarter ended September 30, 2005, versus $15.8 million and $0.30, respectively, for third quarter 2004. Year-to-date, Federal Realty reported net income available for common shareholders of $70.9 million, or $1.34 per diluted share. This compares to net income available for common shareholders of $53.6 million, or $1.04 per diluted share, for the nine months ended September 30, 2004, both of which included insurance recovery for lost income from the Santana Row fire.

FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance. A reconciliation of FFO and FFO per diluted share to net income available for common shareholders and earnings per common share (diluted), respectively, is attached to this press release.

Portfolio Results

On a same-center basis, including redevelopment and expansion properties, property operating income increased 5.3% over third quarter 2004. When redevelopment and expansion properties are excluded from same-center results, property operating income increased 5.9% from third quarter 2004. On a year- to-date basis, same center property operating income has increased 5.2% including redevelopments and expansions, and 5.0% when redevelopments and expansions are excluded.

Overall, the Trust's portfolio improved to 95.5% leased as of September 30, 2005, compared to 94.2% on September 30, 2004. Federal Realty's same- center portfolio was 96.7% leased on September 30, 2005, compared to 96.4% on September 30, 2004.

During third quarter 2005, the Trust signed 93 leases for approximately 441,000 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 395,000 square feet at a weighted-average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 20%. The weighted-average contractual rent on this comparable space for the first year of the new lease is $24.25 per square foot compared to the weighted-average contractual rent of $20.19 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 (i.e., including the impact of straight-line rents), rent increases per square foot for comparable retail space averaged 32% for third quarter 2005.

Year-to-date, Federal Realty has leased more than 860,000 square feet of comparable retail space at a weighted-average cash-basis contractual rent increase per square foot of 23%, and 35% on a GAAP-basis. As of September 30, 2005, Federal Realty's weighted-average contractual minimum rent for retail and commercial space in its portfolio is $18.63 per square foot.

"It is very satisfying to be producing the strong and reliable results that we've been promising to our shareholders," commented Donald C. Wood, president and chief executive officer of Federal Realty Investment Trust. "By aggressively leasing our existing high quality portfolio, effectively executing our pipeline of redevelopment opportunities, and opportunistically acquiring assets that meet our return thresholds, Federal Realty should continue to deliver consistently strong results without taking excessive risk."

In August 2005, Federal Realty began closing sales of residential condominiums at Santana Row. Through October 24, 2005, the Trust had closed 79 units and had 37 units under contract, with associated gross sales proceeds of $47.7 million and $27.0 million, respectively. In addition, Federal Realty had reservations for 13 units. Federal Realty expects the sale of the 219 units to generate total gross sales proceeds of approximately $135 million with sell-out completed in 2006.

As a result of the success of the Santana Row condominium sales to date, the Trust's Board of Trustees declared a special dividend of $0.20 per share on its common shares. The special dividend will be payable on December 20, 2005 to common shareholders of record as of November 28, 2005. As a result of the special dividend, cash dividends paid in 2005 will represent a 17% increase over cash dividends paid in 2004. Depending on the future success of the Santana Row condominium sales, Federal Realty currently anticipates that an additional special dividend is likely to be paid in first quarter 2006.

Initial occupancy of the 256 new residential rental units on the podium of Building Seven commenced in April 2005, with 90 units leased as of October 24, 2005, and lease-up expected to continue through mid-2006.

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 $0.555 per share on its common shares, resulting in an indicated annual rate of $2.22 per share. The regular common dividend will be payable on January 16, 2006, to common shareholders of record as of January 3, 2006.

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 January 31, 2006 to shareholders of record on January 16, 2006.

Guidance

Federal Realty today increased its guidance for 2005 FFO per diluted share to a range of $3.05 to $3.06, and increased its earnings per common share (diluted) guidance to a range of $1.65 to $1.66. In addition, the Trust provided initial guidance for 2006 FFO per diluted share of $3.30 to $3.35, and earnings per common share (diluted) of $1.56 to $1.61.

Summary of Other Quarterly Activities and Recent Developments

  • September 7, 2005 -- Federal Realty declared a regular quarterly cash dividend of $0.555 per common share, resulting in an indicated annual rate of $2.22 per share, and marking 2005 as the 38th consecutive year that Federal Realty has increased its common dividend, the longest consecutive record in the REIT industry.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter 2005 earnings conference call, which is scheduled for November 1, 2005, at 11 a.m. Eastern Standard 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 Thursday, December 1, 2005, 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 17.3 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 0.5 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 95.5% leased to national, regional, and local retailers as of September 30, 2005, with no single tenant accounting for more than 2.2% 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 38 consecutive years, the longest consecutive 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 Current Report on Form 8-K filed on March 2, 2005, 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 any redevelopment or renovation project that we do pursue may not perform as anticipated;
  • 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 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 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 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 review the risks contained in our annual report on Form 10-K, our quarterly reports on Form 10-Q, and the risks contained in our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 2, 2005.

    Federal Realty Investment Trust
    Operating Results
    September 30, 2005


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

                                        Three months ended  Nine months ended
    CONSOLIDATED OPERATING RESULTS         September 30,      September 30,
                                          2005     2004     2005      2004
    Revenues
       Rental income                     $98,071  $94,374  $294,501  $278,725
       Other property income               2,458    3,230     6,487     7,793
       Mortgage interest income            1,310    1,230     4,040     3,611
                                         101,839   98,834   305,028   290,129
    Expenses
       Rental                             20,215   22,252    63,435    65,978
       Real estate taxes                  10,109    9,873    29,644    28,159
       General and administrative          4,957    4,673    14,441    13,443
       Depreciation and amortization      22,591   23,292    67,629    66,029
                                          57,872   60,090   175,149   173,609
       Operating income                   43,967   38,744   129,879   116,520

    Other interest income                    254      459     1,946     1,122
    Interest expense                     (21,664) (21,125)  (65,554)  (63,835)
    Income from real estate partnership      126       19       349        19
    Minority interests                    (1,208)    (936)   (4,003)   (3,317)
    Income from continuing operations     21,475   17,161    62,617    50,509

    Discontinued operations
       (Loss) income before gain on sale
        of real estate                      (258)     502      (480)    2,398
       Gain on sale of real estate         9,463      997    17,347     9,331
    Income from discontinued operations    9,205    1,499    16,867    11,729

    Net Income                            30,680   18,660    79,484    62,238

    Dividends on preferred stock          (2,869)  (2,869)   (8,607)   (8,607)
    Net income available for common
     shareholders                        $27,811  $15,791   $70,877   $53,631



    FUNDS FROM OPERATIONS AVAILABLE FOR
     COMMON SHAREHOLDERS
    Net income                           $30,680  $18,660   $79,484   $62,238
    Gain on sale of real estate           (9,463)    (997)  (17,347)   (9,331)
    Depreciation and amortization of
     real estate assets                   20,506   21,376    61,760    61,145
    Amortization of initial direct costs
     of leases                             1,768    1,882     5,195     5,170
    Depreciation on real estate
     partnership assets                      157       50       471        50
    Funds from operations                 43,648   40,971   129,563   119,272
    Dividends on preferred stock          (2,869)  (2,869)   (8,607)   (8,607)
    Income attributable to operating
     partnership units                       215      242       573     1,032
    Funds from operations available for
     common shareholders                  40,994   38,344   121,529   111,697


    Weighted average number of common
     shares, diluted                      53,559   52,934    53,405    52,074

    Funds from operations available for
     common shareholders per diluted
     share                                 $0.77    $0.72     $2.28     $2.14

    EARNINGS PER COMMON SHARE, BASIC
    Income from continuing operations
     available for common shareholders     $0.35    $0.27     $1.03     $0.83
    (Loss) income from discontinued
     operations before gain on sale of
     real estate                               -     0.01     (0.01)     0.05
    Gain on sale of real estate             0.18     0.02      0.33      0.18
                                           $0.53    $0.30     $1.35     $1.06

    Weighted average number of common
     shares, basic                        52,618   51,640    52,443    50,722

    EARNINGS PER COMMON SHARE, DILUTED
    Income from continuing operations
     available for common shareholders     $0.35    $0.27     $1.02     $0.82
    (Loss) income from discontinued
     operations before gain on sale of
     real estate                           (0.01)    0.01     (0.01)     0.04
    Gain on sale of real estate             0.18     0.02      0.33      0.18
                                           $0.52    $0.30     $1.34     $1.04

    Weighted average number of common
     shares, diluted                      53,149   52,934    52,982    51,273




    Federal Realty Investment Trust
    Summarized Balance Sheets
    September 30, 2005


                              Financial Highlights
                                 (in thousands)


    CONSOLIDATED BALANCE SHEETS
                                               September 30,      December 31,
                                                   2005              2004
    ASSETS                                      (unaudited)

    Real estate, at cost
        Operating                               $2,620,941        $2,480,626
        Construction-in-progress                   135,052           130,286
        Discontinued operations                     12,796            55,364
                                                 2,768,789         2,666,276
    Less accumulated depreciation and
     amortization                                 (644,988)         (595,338)
    Net real estate                              2,123,801         2,070,938

    Cash and cash equivalents                       16,573            30,475
    Accounts and notes receivable                   34,383            34,849
    Mortgage notes receivable                       37,173            42,909
    Investment in real estate partnership            9,425             9,631
    Other assets                                    81,717            78,094
    TOTAL ASSETS                                $2,303,072        $2,266,896

    LIABILITIES AND SHAREHOLDERS' EQUITY

    Liabilities
        Obligations under capital leases
         and mortgage notes                       $407,643          $410,885
        Notes payable                              357,298           325,051
        Senior notes and debentures                568,546           568,121
        Other liabilities                          172,390           153,351
    Total liabilities                            1,505,877         1,457,408

    Minority interests                              19,282            18,954

    Shareholders' equity
        Preferred stock                            135,000           135,000
        Common shares and other
         shareholders' equity                      642,913           655,534
    Total shareholders' equity                     777,913           790,534
    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                     $2,303,072        $2,266,896



    Federal Realty Investment Trust
    Reconciliation of Net Income to FFO Guidance
    September 30, 2005


                                                           2005 Guidance
                                                       ($ millions except per
                                                          share amounts) (1)

    Net income                                        $100 to            $101
    Gain on sale of real estate                        (17)               (17)
    Depreciation and amortization of real estate
     & joint venture assets                             84                 84
    Amortization of initial direct costs of leases       7                  7
    Funds from operations                              174                175
    Income attributable to operating partnership
     units                                               1                  1
    Dividends on preferred stock                       (11)               (11)
    Funds from operations available for common
     shareholders                                      163 to             164

    Weighted Average Shares (diluted)                 53.5

    Funds from operations available for common
     shareholders per diluted share                  $3.05 to           $3.06


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

    Net income                                         $95 to             $98
    Gain on sale of real estate                          -                  -
    Depreciation and amortization of real estate
     & joint venture assets                             86                 86
    Amortization of initial direct costs of leases       7                  7
    Funds from operations                              188                191
    Income attributable to operating partnership
     units                                               1                  1
    Dividends on preferred stock                       (11)               (11)
    Funds from operations available for common
     shareholders                                      177 to             180

    Weighted Average Shares (diluted)                 53.8

    Funds from operations available for common
     shareholders per diluted share                  $3.30 to           $3.35


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

SOURCE Federal Realty Investment Trust

CONTACT:
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

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