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Financial Results
Federal Realty reported funds from operations available for common shareholders (FFO) of $37.8 million or $0.64 per diluted share, and net income available for common shareholders of $10.3 million or earnings per diluted share of $0.17. The Trust's reported results include a provision for litigation of $20.6 million, or $0.35 per diluted share related to a tentative ruling issued on April 22 awarding damages associated with a previously disclosed lawsuit involving a property adjacent to Santana Row. Excluding the litigation provision, FFO per diluted share increased 6.5% to $0.99 in first quarter 2009 compared to $0.93 in first quarter 2008, while total FFO increased to $58.3 million from $55.2 million reported in first quarter 2008. Net income available for common shareholders excluding the litigation provision was $31.0 million and earnings per diluted share was $0.52 for the quarter ended March 31, 2009 versus $29.9 million and $0.51, respectively, for first quarter 2008. Additional information regarding the litigation can be found in the Trust's supplemental report furnished to the SEC on Form 8-K.
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
In first quarter 2009, same-center property operating income, including redevelopment and expansion properties, increased 1.4% over first quarter 2008. When redevelopment and expansion properties are excluded from same-center results, property operating income for first quarter 2009 decreased 2.1% compared to first quarter 2008.
The overall portfolio was 94.2% leased as of March 31, 2009, compared to 95.0% on December 31, 2008 and 96.1% on March 31, 2008. Federal Realty's same-center portfolio was 94.5% leased on March 31, 2009, compared to 95.4% on December 31, 2008 and 96.4% on March 31, 2008.
During the first quarter of 2009, Federal Realty signed 69 leases for 233,000 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 232,000 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 16%. The average contractual rent on this comparable space for the first year of the new leases is $31.42 per square foot, compared to the average contractual rent of $26.99 per square foot for the last year of the prior leases. The previous average contractual rent was 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 26% for first quarter 2009. As of March 31, 2009, Federal Realty's average contractual, cash basis minimum rent for retail and commercial space in its portfolio was $21.88 per square foot.
Refinancing Updates
On May 4, Federal Realty closed a new $372 million unsecured term loan, proceeds of which were utilized to retire the Trust's outstanding $200 million unsecured term loan and provide capital to retire the 8.75% Notes due December 1, 2009. The term loan, which bears interest at an annual rate of LIBOR (subject to a 1.50% floor) plus 300 basis points, will mature in July 2011. The term loan was increased from its initial size of $200 million, reflecting significant demand from high-quality financial institutions for the Trust's credit at market leading terms.
In April, Federal Realty closed a $24.1 million, ten-year loan secured by Rollingwood Apartments in Silver Spring, Maryland at an effective annual interest rate of 5.72%. The Trust has also obtained a commitment of approximately $139 million for a five-year loan secured by four retail assets located in Northern Virginia that is expected to bear interest at an effective annual rate of 7.72%. This secured financing is expected to close during the second quarter of 2009.
As a result of these financing activities, Federal Realty anticipates that it will have adequate capital to retire all of its 2009 debt maturities, will have significant capacity on its $300 million unsecured credit facility and will have no additional debt maturities until 2011.
"I am very pleased with our first quarter results, especially in terms of the steady leasing activity we were able to achieve despite a continuing difficult economic environment," said Donald C. Wood, president and chief executive officer of the Trust. "The combination of strong operating results and support for our financing activities is a testament to the strength and quality of our portfolio and our sustainable low-risk business strategy."
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 $0.65 per share on its common shares, resulting in an indicated annual rate of $2.60 per share. The regular common dividend will be payable in cash on July 15, 2009 to common shareholders of record on June 24, 2009.
Guidance
Federal Realty left its guidance, excluding the provision for litigation, for 2009 FFO per diluted share unchanged at a range of $3.80 to $3.92, and provided 2009 earnings per diluted share guidance of $1.88 to $2.00. Guidance for 2009 assumes an approximately $10 million increase in interest expense relative to 2008 associated with addressing the Trust's fourth quarter 2009 debt maturities significantly in advance of the actual maturity dates, repaying the credit facility with excess proceeds from the Trust's capital raising activities and projected changes in short-term interest rates.
Conference Call Information
Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its first quarter 2009 earnings conference call, which is scheduled for May 7, 2009, at 11 a.m. Eastern Daylight Time. To participate, please call (866) 271-6130 five to ten minutes prior to the call start time and use the passcode FRT EARNINGS (required). Federal Realty will also provide an online Web Simulcast 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 June 5, 2009, by dialing (888) 286-8010 and using the passcode 91157379.
About Federal Realty
Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management and redevelopment of high quality retail assets. Federal Realty's portfolio (excluding joint venture properties) contains approximately 18.1 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 94.2% leased to national, regional, and local retailers as of March 31, 2009, 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 41 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 26, 2009 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 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 close any pending financing activities, 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 26, 2009.
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
March 31, 2009
March 31, December 31,
2009 2008
---- ----
(in thousands)
ASSETS (unaudited)
Real estate, at cost
Operating $3,568,470 $3,567,035
Construction-in-progress 125,074 106,650
------- -------
3,693,544 3,673,685
Less accumulated depreciation and
amortization (865,987) (846,258)
-------- --------
Net real estate 2,827,557 2,827,427
Cash and cash equivalents 22,460 15,223
Accounts and notes receivable 71,781 73,688
Mortgage notes receivable 46,495 45,780
Investment in real estate partnership 28,726 29,252
Prepaid expenses and other assets 93,943 101,406
------ -------
TOTAL ASSETS $3,090,962 $3,092,776
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Mortgages payable and capital lease
obligations $446,362 $452,810
Notes payable 353,856 336,391
Senior notes and debentures 950,401 956,584
Accounts payable and other liabilities 218,716 200,037
------- -------
Total liabilities 1,969,335 1,945,822
Shareholders' equity
Preferred stock 9,997 9,997
Common shares and other shareholders'
equity 1,079,497 1,104,605
--------- ---------
Total shareholders' equity of the Trust 1,089,494 1,114,602
Noncontrolling interest 32,133 32,352
------ ------
Total shareholders' equity 1,121,627 1,146,954
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,090,962 $3,092,776
========== ==========
Federal Realty Investment Trust
Summarized Income Statements
March 31, 2009
Three months
ended March 31,
2009 2008
---- ----
(in thousands,
except per share data)
(unaudited)
Revenue
Rental income $127,330 $121,867
Other property income 2,604 3,386
Mortgage interest income 1,267 1,116
----- -----
Total revenue 131,201 126,369
------- -------
Expenses
Rental expenses 28,705 27,266
Real estate taxes 13,892 12,385
General and administrative 5,145 6,942
Litigation provision 20,632 -
Depreciation and amortization 28,592 25,389
------ ------
Total operating expenses 96,966 71,982
------ ------
Operating income 34,235 54,387
Other interest income 90 339
Interest expense (23,569) (24,353)
Income from real estate partnership 202 331
--- ---
Income from continuing operations 10,958 30,704
Discontinued operations
Income from discontinued operations - 614
Gain on sale of real estate from discontinued
operations 915 -
--- ---
Results from discontinued operations 915 614
--- ---
Net income 11,873 31,318
Net income attributable to noncontrolling
interests (1,389) (1,332)
------ ------
Net income attributable to the Trust 10,484 29,986
Dividends on preferred stock (135) (135)
Net income available for common shareholders $10,349 $29,851
======= =======
EARNINGS PER COMMON SHARE, BASIC
Continuing operations $0.16 $0.50
Discontinued operations 0.01 0.01
$0.17 $0.51
===== =====
Weighted average number of common shares,
basic 58,841 58,503
====== ======
EARNINGS PER COMMON SHARE, DILUTED
Continuing operations $0.16 $0.50
Discontinued operations 0.01 0.01
$0.17 $0.51
===== =====
Weighted average number of common shares,
diluted 58,960 58,780
====== ======
Federal Realty Investment Trust
Funds From Operations
March 31, 2009
Three months
ended March 31,
----------------
2009 2008
---- ----
(in thousands,
except per share data)
Funds from Operations available for common
-------------------------------------------
shareholders (FFO) (1)
----------------------
Net income attributable to the Trust $10,484 $29,986
Gain on sale of real estate (915) -
Depreciation and amortization of real estate assets 25,436 22,950
Amortization of initial direct costs of leases 2,667 2,022
Depreciation of joint venture real estate assets 354 330
--- ---
Funds from operations 38,026 55,288
Dividends on preferred stock (135) (135)
Income attributable to operating partnership units - 232
Income attributable to unvested shares (130) (196)
---- ----
FFO (3) 37,761 55,189
Litigation provision, net of allocation to unvested
shares (3) 20,565 -
------ ---
FFO excluding litigation provision (3) $58,326 $55,189
======= =======
FFO per diluted share (2) $0.64 $0.93
Litigation provision per diluted share (3) 0.35 -
---- ---
FFO per diluted share excluding litigation
provision (2) (3) $0.99 $0.93
===== =====
Weighted average number of common shares, diluted 58,960 59,161
====== ======
Notes:
------
(1) See Glossary of Terms.
(2) Effective January 1, 2009, we adopted FSP EITF No. 03-6-1,
"Determining Whether Instruments Granted in Share-Based Payment
Transactions are Participating Securities", and consequently have
calculated FFO per diluted share under the two-class method, as
defined in SFAS No. 128, for all periods presented. The
implementation resulted in a decrease to the March 31, 2008 reported
FFO per diluted share from $0.94 to $0.93.
(3) FFO includes a charge of $20.6 million, or $0.35 per diluted share,
related to litigation regarding a parcel of land located adjacent to
our Santana Row property. FFO excluding litigation provision
excludes this $20.6 million charge. See additional information in
the litigation update section of this Form 8-K.
Federal Realty Investment Trust
Reconciliation of Net Income to FFO Guidance
March 31, 2009
2009 Guidance
-------------
(Dollars in millions
except per share
amounts)(1)
Funds from Operations available for common
------------------------------------------
shareholders (FFO)
------------------
Net income attributable to the Trust $90 $98
Gain on sale of real estate 1 1
Depreciation and amortization of real estate & real
estate partnership assets 104 104
Amortization of initial direct costs of leases 9 9
--- ---
Funds from operations 204 211
Dividends on preferred stock (1) (1)
Income attributable to operating partnerships units 1 1
Income attributable to unvested shares (1) (1)
-- --
FFO 204 212
Litigation provision (2) 21 21
-- --
FFO excluding litigation provision $226 $233
==== ====
Weighted average number of common shares, diluted 59.4 59.4
FFO per diluted share $3.44 $3.56
Litigation provision (2) 0.36 0.36
---- ----
FFO per diluted share excluding litigation provision $3.80 $3.92
===== =====
Notes:
------
(1) Individual items may not add up to total due to rounding.
(2) See additional information in the litigation update section of this
Form 8-K.
SOURCE Federal Realty Investment Trust
http://www.federalrealty.com
