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- Press Release
Federal Realty Investment Trust Announces Fourth Quarter and Year-End 2002 Operating Results
Federal Realty Investment Trust Announces Fourth Quarter and Year-End 2002 Operating Results
ROCKVILLE, Md.--(BUSINESS WIRE)--Feb. 12, 2003--Federal Realty Investment Trust (NYSE:FRT) today reported operating results for its fourth quarter and year ended December 31, 2002.
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Funds from operations (FFO), excluding charges associated with the accelerated executive transition, was $0.63 per diluted share for the fourth quarter
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Same-center net operating income, excluding the impact of redevelopments and expansions, increased 3.7% versus fourth quarter 2001
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Cash rent increases on lease rollovers were 12% for the fourth quarter and 13% for the year on over 265,000 and approximately
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1.3 million square feet of retail space, respectively
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FFO per diluted share guidance for 2003 remains unchanged at $2.60
Financial Results
Federal Realty reported FFO of $14.0 million for the fourth quarter of 2002, or $0.32 per diluted share. This includes a $0.31 charge recognized as a result of the accelerated executive transition announced on December 20, 2002. Excluding this charge, the Trust would have reported FFO of $27.8 million, or $0.63 per diluted share.
For the year ended December 31, 2002, Federal Realty reported FFO of $90.5 million, or $2.11 per diluted share. During 2002, the Trust recognized $22.3 million of charges relating to the change in business strategy and associated management changes announced in March, and the accelerated executive transition announced in December. Excluding these charges, Federal Realty would have reported FFO of $112.8 million, or $2.63 per diluted share.
On a same-center basis, net operating income, excluding the impact of properties redeveloped or expanded, increased 3.7% versus fourth quarter 2001 and 4.4% versus full-year 2001. Although same-center net operating income increased, FFO declined on a year-over-year basis due to pre-opening expenses and initial operations at Santana Row.
Historical Same-Center NOI Growth
3Q01 4Q01 1Q02 2Q02 3Q02 4Q02
FRT - excluding
redevelopment
properties(1) 6.5% 6.3% 6.2% 4.7% 4.0% 3.7%
Peer Group
Average (2) 2.4% 1.5% 0.3% -0.3% -0.4% n/a
(1) FRT same-center NOI growth excludes properties where redevelopment
capital was invested. If these properties were included, same-center
NOI growth would have equaled or exceeded the growth shown in all
periods.
(2) Peer Group consists of Kimco Realty, Regency Centers, New Plan
Excel Realty, Weingarten Realty and Pan Pacific Retail Properties.
Complete 4Q02 data for Peer Group not yet available.
Source: Morgan Stanley Research
Portfolio Results
At December 31, 2002, overall occupancy, excluding Santana Row, remained strong at 95.5%, compared to 95.6% on December 31, 2001 and
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95.5% on September 30, 2002. Including the 444,000 square feet of retail space in Phase I of Santana Row, occupancy on December 31, 2002 was 94.7%.
During the fourth quarter, the Trust signed leases for more than 310,000 square feet of retail space. On a comparable space basis (i.e. spaces for which there was a former tenant), the Trust leased over 265,000 square feet at an average cash increase in rent per square foot of 12%. On a cash-basis, the weighted-average minimum rent on this space for the first year of the new lease was $20.92 per square foot compared to the previous weighted-average rent of $18.69 per square foot. The previous weighted-average 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. Rent increases on the almost 1.3 million square feet of comparable space leased during 2002 averaged 13.0% on a cash basis, using the same methodology.
"We've tackled some challenging issues in 2002, and without question have emerged a stronger company," stated Donald C. Wood, Federal Realty's president and chief executive officer. "Our balance sheet is stronger compared to a year ago and Santana Row is open, both of which mitigate risk in this difficult economic climate."
Summary of Other Quarterly Activities and Recent Developments
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On February 7, 2003, the Trust announced plans for Phase II of Santana Row, which includes 84,000 square feet of retail space on two pad sites and 275 additional parking spaces. 95% of the retail space has been pre-leased to Best Buy and The Container Store, and Federal Realty expects an approximately 16% unleveraged return on its $27 million cost.
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On January 15, 2003, Federal Realty announced that three of its five Kmart locations were on the list of 326 stores that Kmart intends to close. The three properties potentially impacted by the announcement are in Queens, New York, Flourtown, Pennsylvania and Leesburg, Virginia. Details of the terms of these leases are contained in the January 15, 2003 press release.
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On January 9, 2003, the Trust announced the opening of a new 62,000 square foot Giant Food and Pharmacy at Bethesda Row. Federal Realty invested $3.6 million in this, the fifth phase of Bethesda Row, and expects an approximately 14% cash return on cost.
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On December 20, 2002, Federal Realty announced the resignation of Steven J. Guttman as Trustee, chief executive officer and chairman of the Board of Trustees effective January 1, 2003. Donald Wood, the Trust's then president and chief operating officer, was named chief executive officer and a member of the Board of Trustees. Mark Ordan, a member of the Board of Trustees since 1996, was named non-executive chairman of the board.
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On November 19, 2002, Federal Realty issued $150 million of senior unsecured notes, rated Baa2 and BBB by Moody's and Standard and Poor's, respectively. The notes yielded 6.181% to investors, and proceeds from the issuance, along with fire insurance proceeds previously received by the Trust, were utilized to retire the Santana Row construction loan.
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On November 7, 2002, Federal Realty announced the successful opening of Santana Row, the Trust's mixed-use community in San Jose, California. Phase I of Santana Row includes 444,000 square feet of retail, 255 residential units and a 213 room boutique hotel.
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In October 2002, Standard & Poor's reaffirmed the Trust's BBB corporate credit rating and removed the Trust from credit watch. In addition, Moody's Investor Service reaffirmed its Baa2 senior unsecured debt ratings for the Trust and changed its rating outlook to negative, from stable, as a result of the impact of property loss and cash flow disruption caused by the August 19 fire at Santana Row.
Conference Call Information
Federal Realty's management team will present an in depth discussion of the Trust's operating performance on its fourth quarter earnings conference call, which is scheduled for Thursday, February 13, 2003 at 11:00 A.M. Eastern Time. To participate, please call 888/560-8502 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 conference call. A telephone recording of the call will be available for 14 days by dialing 888/568-0348.
Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management, development and re-development of shopping centers and street retail properties. Federal Realty's portfolio contains over 15 million square feet located in major metropolitan markets across the United States. The operating portfolio is currently approximately 95% 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 New York Stock Exchange 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:
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risks that our growth will be limited if we cannot obtain additional capital;
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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;
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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;
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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
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those risks detailed from time to time in our SEC reports, including its annual report on Form 10-K and its 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
December 31, 2002
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Financial Highlights
(in thousands, except per share data)
Three Months Twelve Months
Ended Ended
December 31, December 31,
OPERATING RESULTS 2002 2001 2002 2001
----------------- -------- -------- --------- ---------
Revenues
Rental income $83,843 $73,390 $298,085 $274,567
Other property income 4,200 3,764 15,593 13,953
Interest and other income 1,394 1,315 5,156 6,590
-------- -------- --------- ---------
89,437 78,469 318,834 295,110
Expenses
Rental 24,303 17,601 73,591 62,715
Real estate
taxes 8,108 7,807 31,186 28,348
Interest 19,741 16,953 65,054 69,313
Administrative 3,581 4,310 13,790 14,281
Restructuring expenses 13,780 - 22,269 -
Depreciation and amortization 16,425 15,610 64,251 59,171
-------- -------- --------- ---------
85,938 62,281 270,141 233,828
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Operating income before
investors' share
of operations and
discontinued operations 3,499 16,188 48,693 61,282
Investors' share of
operations (755) (1,179) (4,112) (5,170)
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Income before gain on sale of
real estate net of loss on
abandoned
developments held for sale
and discontinued
operations 2,744 15,009 44,581 56,112
Income from operations of
discontinued assets 35 878 1,252 3,459
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Income before gain on sale of
real estate net of
loss on abandoned
developments held for
sale 2,779 15,887 45,833 59,571
Gain on sale of real estate
net of loss on abandoned
developments held for sale - 1,287 9,454 9,185
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Net income 2,779 17,174 55,287 68,756
Dividends on preferred stock (4,857) (3,071) (19,425) (9,034)
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Net income
(loss)
available
for common
shareholders $(2,078) $14,103 $35,862 $59,722
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Funds from Operations
Net income
(loss)
available for
common
shareholders $(2,078) $14,103 $35,862 $59,722
Gain on sale
of real
estate - (1,287) (9,454) (9,185)
Depreciation
and
amortization
of real
estate assets 14,933 14,211 58,605 54,350
Amortization
of initial
direct costs
of leases 1,204 1,146 4,750 4,161
Income
attributable
to operating
partnership
units (37) 335 740 1,384
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Funds from
operations 14,022 28,508 90,503 110,432
Add back
restructuring
expense 13,780 - 22,269 -
-------- -------- --------- ---------
Adjusted funds
from
operations $27,802 $28,508 $112,772 $110,432
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Weighted
average
number of
common
shares,
diluted 44,251 40,653 42,882 40,266
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Adjusted funds
from
operations
per share $0.63 $0.70 $2.63 $2.74
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Earnings per common share,
basic
Income (loss) before gain
on sale of real estate
net of loss on abandoned
developments held for
sale and
discontinued
operations $(0.05) $0.30 $0.60 $1.20
Discontinued operations - 0.02 0.03 0.09
Gain on sale of real
estate net of loss on
abandoned developments
held for sale - 0.03 0.23 0.23
-------- -------- --------- ---------
$(0.05) $0.35 $0.86 $1.52
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Weighted average
number of common
shares, basic 43,014 39,473 41,624 39,164
======== ======== ========= =========
Earnings per common share,
diluted
Income (loss) before gain
on sale of real estate
net of loss on abandoned
developments held for
sale and
discontinued
operations $(0.05) $0.30 $0.60 $1.20
Discontinued operations - 0.02 0.03 0.09
Gain on sale of real
estate net of loss on
abandoned developments
held for sale - 0.03 0.22 0.23
-------- -------- --------- ---------
$(0.05) $0.35 $0.85 $1.52
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Weighted average
number of common
shares, diluted 44,251 40,653 42,882 40,266
======== ======== ========= =========
Federal Realty Investment Trust
Balance Sheet
December 31, 2002
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Financial Highlights
(in thousands, except per share data)
BALANCE SHEET DATA December December
------------------ 31, 31,
2002 2001
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Assets
Real estate, at cost
Operating $1,864,244 $1,741,385
Development 442,582 321,986
Discontinued operations - 40,933
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2,306,826 2,104,304
Less accumulated depreciation and
amortization (450,697) (395,767)
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1,856,129 1,708,537
Other Assets
Mortgage notes receivable 35,577 35,607
Cash and investments 23,123 17,563
Receivables 18,722 15,483
Tax deferred exchange escrows - 6,006
Other assets 65,827 51,685
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Total Assets $1,999,378 $1,834,881
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Liabilities and Shareholders' Equity
Obligations under capital leases, mortgages
and construction loans $393,212 $450,336
Notes payable 198,311 174,843
Senior notes 535,000 410,000
5 1/4% Convertible subordinated debentures 75,000 75,289
Other liabilities 154,280 135,122
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Total Liabilities 1,355,803 1,245,590
Preferred stock 235,000 235,000
Common Shares and Other Shareholders' Equity 408,575 354,291
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Total Liabilities and Shareholders' Equity $1,999,378 $1,834,881
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CONTACT:
Federal Realty Investment Trust
Investor Inquiries:
Andrew Blocher, 301/998-8166
ablocher@federalrealty.com
or
Media Inquiries:
Kristine Warner, 301/998-8212
kwarner@federalrealty.com
