UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FORM 10-K
For Fiscal Year Ended: December 31, 1996 Commission File No.17533
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FEDERAL REALTY INVESTMENT TRUST
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(Exact name of registrant as specified in its charter)
District of Columbia 52-0782497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1626 East Jefferson Street, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
(301) 998-8100
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
- ------------------- ---------------------
Common Shares of Beneficial Interest New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Preferred Shares of Beneficial Interest*
* None issued, registered pursuant to a shelf registration
Securities registered pursuant to Section 12(g) of the Act:
7.48% Senior Debentures
8 7/8% Senior Notes
8% Senior Notes
6 5/8% Senior Notes
Subordinated Debt Securities*
* None issued, registered pursuant to a shelf registration
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No .
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
At February 10, 1997, the aggregate market value of Common
Shares of Beneficial Interest of Federal Realty Investment Trust held by
nonaffiliates was $1.1 billion based upon the closing price of such Shares on
the New York Stock Exchange.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock.
Class Outstanding at February 10, 1997
- ----- --------------------------------
Common Shares of Beneficial Interest 38,934,321
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
PART III
--------
Portions of the Trust's Proxy Statement in connection with its Annual
Meeting to be held on May 7, 1997 (hereinafter called "1997 Proxy
Statement"). Specifically, the Sections entitled "Summary Compensation
Table", "Employment Agreements", "Aggregated Option Exercises in 1996 and
December 31, 1996 Option Values", "Retirement and Disability Plans", and
"Compensation Committee Interlocks and Insider Participation", "Ownership
of Shares by Trustees and Officers", and "Certain Transactions" appearing
in the 1997 Proxy Statement are incorporated herein by reference.
The Exhibit Index for this report is found on page 26.
This report, including Exhibits, contains 91 pages.
2
PART I & II
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Item 1. Business
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Federal Realty Investment Trust is an owner, operator and redeveloper of
retail properties. Founded in 1962 as a District of Columbia business trust
of unlimited duration, the Trust is a self-administered equity real estate
investment trust. The Trust consolidates the financial statements of three
wholly owned subsidiaries, eleven partnerships and a joint venture. At
December 31, 1996 the Trust owned 86 retail properties and one apartment
complex.
The Trust operates in a manner intended to enable it to qualify as a real
estate investment trust (REIT) under Sections 856- 860 of the Internal Revenue
Code. Under those sections, a REIT which distributes at least 95% of its real
estate investment trust taxable income to its shareholders each year and which
meets certain other conditions will not be taxed on that portion of its
taxable income which is distributed to its shareholders. Therefore, no
provision for Federal income taxes is required.
An important part of the Trust's strategy is to acquire older, well-
located properties in prime, densely populated and affluent areas and to
enhance their operating performance through a program of renovation,
expansion, reconfiguration and retenanting. The Trust's traditional focus has
been on community and neighborhood shopping centers that are anchored by
supermarkets, drug stores or high volume, value oriented retailers that
provide consumer necessities. Late in 1994 the Trust expanded this strategy
to include retail buildings and shopping centers in prime established main
street shopping areas. The Trust continually evaluates its properties for
renovation, retenanting and expansion opportunities. Similarly, the Trust
regularly reviews its portfolio and from time to time considers selling
certain of its properties.
The Trust's portfolio of properties has doubled from 43 as of January 1,
1992 to 87 at December 31, 1996. During this five year period the Trust
acquired 48 retail properties for approximately $414 million. Eleven of the
seventeen acquisitions in 1996 were in California and two were in Florida,
which are new markets for the Trust. During this same period four shopping
centers were sold. Also during this period the Trust spent over $183 million
to renovate, expand, improve and retenant its properties. All but four of the
acquisitions were funded primarily by cash. Of the four properties not fully
acquired by cash, one was acquired by means of capital and ground leases, one
was acquired for common shares of the Trust and the assumption of a mortgage,
one was acquired for cash and the assumption of a municipal bond issue and the
fourth was acquired for cash with a minority investment by a third party. This
growth was financed through borrowing and equity offerings, since each year
the Trust has distributed all or the majority of its cash provided by
operating activities to its shareholders.
3
The Trust's 86 retail properties, consisting of 57 shopping centers and 29
main street retail buildings, are located in 14 states and the District of
Columbia, primarily along the East Coast between the Boston metropolitan area
and Richmond, Virginia. Nineteen of the shopping centers are located in the
Washington, D.C. metropolitan area; eleven are in Pennsylvania, primarily in
the Philadelphia area; nine are in New Jersey; five are in Illinois; three are
in Virginia; three are in Massachusetts; and there is one in each of the
following states: California, Connecticut, Georgia, Michigan, New York, North
Carolina and Tennessee. The main street retail buildings are located in
California, Connecticut, Florida, Illinois, Massachusetts and New Jersey. No
single property accounts for over 10% of the Trust's revenues.
The Trust has approximately 1,800 tenants, ranging from sole proprietors
to major national retailers; no one tenant or corporate group of tenants
accounts for 5% or more of revenue. The Trust's leases with these tenants are
classified as operating leases and typically are structured to include minimum
rents, percentage rents based on tenants' sales volumes and reimbursement of
certain operating expenses and real estate taxes.
The Trust is seeking to increase its pace of acquiring older, well-
located shopping centers and retail buildings and then enhancing their revenue
potential through a program of renovation, retenanting and remerchandising.
The Trust is also studying sites which are suitable for the development of new
shopping centers. During the years ended December 31, 1996, 1995 and 1994,
retail properties have contributed 96%, 96% and 95%, respectively of the
Trust's total revenue.
The Trust amended its by-laws in 1996 to permit investments west of the
Mississippi River. Investments are not required to be based on specific
allocation by type of property. The extent to which the Trust might mortgage
or otherwise finance investments varies with the investment involved and the
economic climate.
The success of the Trust depends upon, among other factors, the trends of
the economy, including interest rates, construction costs, retailing trends,
income tax laws, increases or decreases in operating expenses, governmental
regulations, population trends, zoning laws, legislation and the ability of
the Trust to keep its properties leased at profitable levels. The Trust
competes for tenants with other real estate owners and the Trust's properties
account for only a small fraction of the retail space available for lease.
The Trust competes for investment opportunities and debt and equity capital
with individuals, partnerships, corporations, financial institutions, life
insurance companies, pension funds, trust funds and other real estate
investment trusts.
Investments in real property create a potential for environmental
liability on the part of the current and previous owners of, or any mortgage
lender on, such real property. If hazardous substances are discovered on or
emanating from any
4
property, the owner or operator of the property may be held liable for costs
and liabilities relating to such hazardous substances. Effective September 1,
1996 the Trust obtained environmental insurance on sixty of its properties.
Subject to certain exclusions and deductibles, the insurance provides coverage
for unidentified, pre-existing conditions and for future contamination caused
by tenants and third parties.
The Trust's current policy is to obtain an environmental study on each
property it seeks to acquire. On recent acquisitions, any substances
identified prior to closing which present an immediate environmental hazard
have been or are in the process of remediation. Costs related to the
abatement of asbestos which increase the value of Trust properties are
capitalized. Other costs are expensed. In 1996 and 1995 approximately
$970,000 and $1.0 million, respectively, of which $540,000 and $796,000,
respectively, was capitalized abatement costs, was spent on environmental
matters. The Trust has budgeted approximately $3.0 million for 1997 for
environmental matters, a majority of which is projected for asbestos
abatement. (See Note 6 of Notes to Consolidated Financial Statements.)
Current Developments
--------------------
In 1996 the Trust acquired $105.6 million of retail property. Three
shopping centers were acquired: Saugus Plaza Shopping Center, located in
metropolitan Boston, Massachusetts for $12.7 million in cash; Wynnewood
Shopping Center in suburban Philadelphia, Pennsylvania for $21.8 million in
cash; and Escondido Promenade in suburban San Diego, California for $14.2
million in cash and the assumption of $9.4 million of municipal bonds.
Fourteen retail buildings were acquired: two buildings in Winter Park, Florida
for a cost of $6.8 million; two buildings in Greenwich, Connecticut for $12.7
million; and ten buildings, located in Pasadena, Santa Monica and San Diego,
California, for cash of $17.6 million with minority interests contributing
another $10.4 million.
During 1996 the Trust spent $42.2 million in renovating, expanding and
retenanting its properties. These improvements included $11.5 million on the
final tenant work and construction of an additional 30,000 square feet at
Congressional Plaza, which includes the Trust's corporate offices; $4.7
million on the redevelopment and expansion of a portion of Bethesda Row; $3.9
million for the renovation of Brick Plaza in Brick, New Jersey; and $2.3
million to buy out below market leases. In addition the Trust invested $23.4
million in mortgage notes receivable, most of which are convertible into
ownership interests in the properties by which they are secured.
The Trust initially funded the majority of its 1996 acquisitions, capital
improvement projects and investments in mortgages with borrowings under its
revolving credit facilities with four banks. Borrowings on these revolving
credit facilities were then repaid from long term debt and equity issues. In
August 1996 the Trust issued $50.0 million of 7.48% Debentures due August 15,
2026, netting approximately $49.8 million. In May
5
the Trust sold 1.8 million shares of beneficial interest ("shares") at $22 per
share to an institutional investor, netting approximately $39.3 million. In
December the Trust sold another 1.6 million shares to the public at $27 7/8
per share, netting $42.9 million. Another three million shares were sold to an
institutional investor on February 4, 1997 for $28 per share, netting $83.9
million.
At December 31, 1996 the Trust had 205 full-time employees.
6
Item 2. Properties
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Retail Properties
- -----------------
The following table sets forth information concerning each retail property in
which the Trust owns an equity interest or has a leasehold interest as of
December 31, 1996. Except as otherwise noted, retail properties are 100% owned
in fee by the Trust.
Year Year Number of Occupancy (1)
Completed Acquired Square Feet (1) Tenants Acres Overall / Economic
------------- ------------ ------------------- ----------- --------- ----------------------
Allwood 1958 1988 52,000 8 5 100% / 100%
Clifton, NJ 07013 (2)
Andorra 1953 1988 257,000 40 23 94% / 94%
Philadelphia, PA 19128 (3)
Bala Cynwyd 1955 1993 266,000 29 22 99% / 99%
Bala Cynwyd, PA 19004
Barracks Road 1958 1985 478,000 86 39 98% / 97%
Charlottesville, VA 22905 (3)
Bethesda Row 1945-1991 1993 276,000 68 8 99% / 97%
Bethesda, MD 20814 (2) (5)
Blue Star 1959 1988 392,000 32 55 97% / 97%
Watchung, NJ 07060 (2)
Brainerd Village 1960 1987 218,000 26 20 75% / 64%
Chattanooga, TN 37411
Brick Plaza 1958 1989 288,000 30 42 98% / 98%
Brick Township, NJ 08723 (2)
Bristol 1959 1995 296,000 38 22 97% / 97%
Bristol, CT 06010
Brunswick 1957 1988 261,000 23 22 100% / 99%
North Brunswick, NJ 08902 (2)
Clifton 1959 1988 80,000 13 8 98% / 98%
Clifton, NJ 07013 (2)
Congressional Plaza 1965 1965 341,000 47 22 100% / 99%
Rockville, MD 20852 (4)
Principal
Tenants
------------------------
Allwood Grand Union
Clifton, NJ 07013 (2) Mandee Shop
Andorra Acme Markets
Philadelphia, PA 19128 (3) Andorra Theater
Bala Cynwyd Lord & Taylor
Bala Cynwyd, PA 19004 Acme Markets
Barracks Road Bed, Bath & Beyond
Charlottesville, VA 22905 (3) Safeway
Superfresh
Bethesda Row Giant Food
Bethesda, MD 20814 (2) (5) Giant Pharmacy
Blue Star Caldor
Watchung, NJ 07060 (2) Shop Rite
Toys R Us
Brainerd Village Office Depot
Chattanooga, TN 37411 Sports Authority
Brick Plaza A&P Supermarket
Brick Township, NJ 08723 (2) Steinbach's
Bristol Bradlees
Bristol, CT 06010 Super Stop & Shop
Brunswick Caldor
North Brunswick, NJ 08902 (2) Grand Union
Schwartz Furniture
Clifton Acme Markets
Clifton, NJ 07013 (2) Rickel Home Center
Congressional Plaza Fresh Fields
Rockville, MD 20852 (4) Tower Records
Buy Buy Baby
7
Year Year Number of
Completed Acquired Square Feet (1) Tenants Acres
------------- ------------ ------------------ ----------- ---------
Crossroads 1959 1993 192,000 23 15
Highland Park, IL 60035
Dedham 1959 1993 253,000 34 18
Dedham, MA 02026
Eastgate 1963 1986 159,000 31 17
Chapel Hill, NC 27514
Ellisburg Circle 1959 1992 258,000 37 27
Cherry Hill, NJ 08034
Escondido Promenade
Escondido, CA 92029 (6) 1987 1996 223,000 45 18
Falls Plaza 1962 1967 60,000 10 6
Falls Church, VA 22046
Feasterville 1958 1980 104,000 11 12
Feasterville, PA 19047 (2)
Federal Plaza 1970 1989 243,000 39 18
Rockville, MD 20852
Finley Square 1974 1995 306,000 17 21
Downers Grove, IL 60515
Flourtown 1957 1980 183,000 22 15
Flourtown, PA 19031
Gaithersburg Square 1966 1993 207,000 36 17
Gaithersburg, MD 20878
Garden Market 1958 1994 134,000 22 12
Western Springs, IL 60558
Governor Plaza 1963 1985 252,000 21 26
Glen Burnie, MD 21961 (3)
Hamilton 1961 1988 180,000 14 18
Hamilton, NJ 08690 (2)
Occupancy (1) Principal
Overall/Economic Tenants
---------------------- --------------------------
Crossroads 100%/100% Gold Standard Liquors
Highland Park, IL 60035 TJ Maxx
Dedham 91%/91% Ames
Dedham, MA 02026 Cherry & Webb
Eastgate 98%/97% Food Lion
Chapel Hill, NC 27514 Southern Season
Ellisburg Circle 99%/99% Shop Rite
Cherry Hill, NJ 08034 Bed, Bath & Beyond
Escondido Promenade
Escondido, CA 92029 (6) 92%/92% Toys R Us
TJ Maxx
Falls Plaza 100%/100% Giant Food
Falls Church, VA 22046 CVS Pharmacy
Feasterville 96%/96% Office Max
Feasterville, PA 19047 (2) Genuardi Markets
Federal Plaza 99%/95% Bed, Bath & Beyond
Rockville, MD 20852 Comp USA
TJ Maxx
Finley Square 85%/85% Bed, Bath & Beyond
Downers Grove, IL 60515 Service Merchandise
Flourtown 87%/87% K Mart
Flourtown, PA 19031 Genuardi Markets
Gaithersburg Square 86%/86% Borders Books
Gaithersburg, MD 20878 Bed, Bath & Beyond
Garden Market 100%/100% Dominick's
Western Springs, IL 60558 Ace Hardware
Governor Plaza 95%/95% Comp USA
Glen Burnie, MD 21961 (3) Bally's Total Fitness
Hamilton 100%/100% Shop Rite
Hamilton, NJ 08690 (2) Steven's Furniture
A.C. Moore
8
Year Year Number of
Completed Acquired Square Feet (1) Tenants Acres
------------- ------------ ------------------ ----------- --------
Huntington 1962 1988 274,000 12 21
Huntington, NY 11746 (2)
Idylwood Plaza 1991 1994 73,000 18 6
Falls Church, VA 22030
Lancaster 1958 1980 107,000 17 11
Lancaster, PA 17601 (2)
Langhorne Square 1966 1985 208,000 28 21
Levittown, PA 19056
Laurel Centre 1956 1986 382,000 57 26
Laurel, MD 20707
Lawrence Park 1972 1980 340,000 40 28
Broomall, PA 19008 (2)
Loehmann's Plaza 1971 1983 245,000 48 18
Fairfax, VA 22042 (7)
Mid-Pike Plaza 1963 1982 303,000 21 20
Rockville, MD 20852 (2)
Northeast 1959 1983 303,000 40 19
Philadelphia, PA 19114
Northeast Plaza 1952 1986 446,000 45 44
Atlanta, GA 30329
North Lake Commons 1989 1994 123,000 20 13
Lake Zurich, IL 60047
Old Keene Mill 1968 1976 92,000 19 11
Springfield, VA 22152
Pan Am 1979 1993 218,000 29 25
Fairfax, VA 22031
Occupancy (1) Principal
Overall / Economic Tenants
---------------------- ------------------------
Huntington 99% / 99% Bed, Bath and Beyond
Huntington, NY 11746 (2) Service Merchandise
Toys R Us
Idylwood Plaza 97% / 97% Super Crown
Falls Church, VA 22030 Fresh Fields
Lancaster 100% /100% Giant Eagle
Lancaster, PA 17601 (2) A.C. Moore
Langhorne Square 77% /64% Drug Emporium
Levittown, PA 19056 Marshalls
Laurel Centre 91% / 91% Giant Food
Laurel, MD 20707 Marshalls
Toys R US
Lawrence Park 98% / 98% Acme Markets
Broomall, PA 19008 (2) Best Products
Rickel Home Center
Loehmann's Plaza 94% / 94% Loehmann's Dress Shop
Fairfax, VA 22042 (7) Linens N Things
Mid-Pike Plaza 97% / 97% Syms
Rockville, MD 20852 (2) Toys R Us
G Street Fabrics
Northeast 99% / 99% Burlington Coat Factory
Philadelphia, PA 19114 Marshalls
Northeast Plaza 71% /61% Publix
Atlanta, GA 30329 Cinema 12
North Lake Commons 97% / 96% Dominick's
Lake Zurich, IL 60047
Old Keene Mill 74% / 74% Fresh Fields
Springfield, VA 22152 Rite Aid
Pan Am 94% / 94% Micro Center
Fairfax, VA 22031 Safeway
MJ Designs
9
Year Year Number of Occupancy (1)
Completed Acquired Square Feet (1) Tenants Acres Overall/Economic
----------- ---------- ----------------- ----------- ------- --------------------
Park & Shop 1930 1995 47,000 11 1 95%/88%
Washington, DC 20036
Perring Plaza 1963 1985 437,000 17 27 100%/100%
Baltimore, MD 21134 (3)
Queen Anne Plaza 1967 1994 149,000 11 18 100%/100%
Norwell, MA 02061
Quince Orchard 1975 1993 238,000 28 16 95%/85%
Gaithersburg, MD 20877 (5)
Roseville 1964 1973 143,000 2 20 22%/22%
Roseville, MI 48066
Rutgers 1973 1988 216,000 18 27 95%/95%
Franklin, N.J. 08873 (2)
Saugus Plaza 1976 1996 171,000 8 19 96%/96%
Saugus, MA 01906
Shillington 1956 1980 74,000 18 8 92%/81%
Shillington, PA 19607 (2)
Shirlington 1940 1995 349,000 44 16 92%/92%
Arlington, VA 22206
Town & Country 1968 1973 236,000 22 19 92%/92%
Springfield, IL 62704
Troy 1966 1980 205,000 18 19 99%/99%
Parsippany-Troy, NJ 07054 (2)
Tysons Station 1954 1978 50,000 15 4 95%/91%
Falls Church, VA 22043
West Falls 1960 1972 62,000 17 5 96%/96%
Falls Church, VA 22046
Wildwood 1958 1969 85,000 34 13 100%/100%
Bethesda, MD 20814
Principal
Tenants
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Park & Shop Petco
Washington, DC 20036 Pizzeria Uno
Perring Plaza Home Depot
Baltimore, MD 21134 (3) Metro Foods
Burlington Coat Factory
Queen Anne Plaza TJ Maxx
Norwell, MA 02061 Star Markets
Quince Orchard Circuit City
Gaithersburg, MD 20877 (5) Dyncorp
Roseville Drug Emporium
Roseville, MI 48066
Rutgers Foodtown
Franklin, N.J. 08873 (2) K Mart
Saugus Plaza K Mart
Saugus, MA 01906 Super Stop & Shop
Shillington Super Trak Auto
Shillington, PA 19607 (2)
Shirlington Carlyle Grand Cafe
Arlington, VA 22206 Cineplex Odeon
Town & Country Burlington Coat Factory
Springfield, IL 62704
Troy Comp USA
Parsippany-Troy, NJ 07054 (2) K Mart
Pathmark
Tysons Station Linens N Things
Falls Church, VA 22043
West Falls Staples
Falls Church, VA 22046
Wildwood CVS Pharmacy
Bethesda, MD 20814 Sutton Place Gourmet
10
Year Year Number of Occupancy (1)
Completed Acquired Square Feet (1) Tenants Acres Overall/Economic
------------- ------------ ------------------ ------------ --------- ---------------------
Williamsburg 1961 1986 248,000 33 21 99%/99%
Williamsburg, VA 23187
Willow Grove 1953 1984 228,000 28 14 96%/96%
Willow Grove, PA 19090
The Shops at Willow Lawn 1957 1983 435,000 103 37 90%/80%
Richmond, VA 23230 (5)
Wynnewood 1948 1996 252,000 20 16 93%/93%
Wynnewood, PA 19096
Retail buildings
- ----------------
Thirteen buildings in CT 1900-1991 1994-1996 231,000 88 98%/98%
Ten buildings in CA(8) 1888-1995 1996 139,000 25 92%/92%
Two buildings in FL 1920 1996 28,000 9 100%/93%
One building in MA 1930 1995 12,000 7 100%/82%
One building in NJ 1940 1995 11,000 2 100%/100%
Two buildings in IL 1920-1927 1995 19,000 3 82%/82%
Principal
Tenants
---------------------
Williamsburg Food Lion
Williamsburg, VA 23187 Peebles
Rose's
Willow Grove Marshalls
Willow Grove, PA 19090 Toys R Us
The Shops at Willow Lawn Leggett Stores
Richmond, VA 23230 (5) Barnes & Noble
Cineplex Odeon
Wynnewood Food Fare
Wynnewood, PA 19096
Retail buildings
- ----------------
Thirteen buildings in CT Barney's
Eddie Bauer
Saks Fifth Avenue
Ten buildings in CA Disney Store
Two buildings in FL Limited Express
One building in MA M. Joseph
One building in NJ Legg Mason
Two buildings in IL Foodstuff
(1) Overall occupancy is expressed as a percentage of rentable square feet
and includes square feet covered by leases for stores not yet opened.
Economic occupancy is expressed as a percentage of rentable square
feet, but only includes leases currently generating rental income.
(2) The Trust has a leasehold interest in this property.
(3) The Trust owns a 99.9% partnership interest in this center.
(4) The Trust owns a 49% equity interest in this center.
(5) The Trust owns this property subject to a ground lease.
(6) The Trust owns the controlling interest in this center. A minority
owner has an interest in the profits of the center.
(7) The Trust has a 1% general partnership interest and manages the
partnership. A 99% interest was sold to a limited partner.
(8) The Trust owns the general partnership interest in these buildings.
Apartments
- ----------
The following table sets forth information concerning the Trust's apartment
development as of December 31, 1996 which is 100% owned by the Trust in fee.
This development is not subject to rent control.
Year Year Eff. and
Property Completed Acquired Acres 1-BR 2-BR 3-BR Total Occupancy
- -----------------------------------------------------------------------------------------------------------------------------------
Rollingwood 1960 1971 14 58 163 61 282 99%
Silver Spring, MD
9 three-story buildings
11
Item 3. Legal Proceedings.
------ -----------------
None
Item 4. Submission of Matters to a Vote of Security Holders
------ ---------------------------------------------------
None
Item 5. Market for Registrant's Common Equity and Related Stockholder
------ -------------------------------------------------------------
Matters.
-------
Market Quotations
Dividends
Quarter ended High Low Paid
------------- ---- --- ---------
December 31, 1996 $28 3/4 $22 5/8 $ .42
September 30, 1996 25 21 3/4 .41
June 30, 1996 23 1/8 20 1/2 .41
March 31, 1996 23 1/8 20 1/4 .41
December 31, 1995 $23 1/2 $20 $ .41
September 30, 1995 23 5/8 21 1/8 .395
June 30, 1995 22 5/8 19 3/4 .395
March 31, 1995 22 20 1/4 .395
The number of holders of record for Federal Realty's common shares of
beneficial interest at December 31, 1996 was 7,573.
For the years ended December 31, 1996 and 1995, $.21 and $.43,
respectively, of dividends paid represented a return of capital.
Dividends declared per quarter during the last two fiscal years were as
follows:
Quarter Ended 1996 1995
------------- ---- ----
March 31 $ .41 $.395
June 30 .41 .395
September 30 .42 .41
December 31 .42 .41
The Trust's common shares of beneficial interest are listed on the New
York Stock Exchange.
12
Item 6. Selected Financial Data.
-----------------------
In thousands, except per share data
Year ended December 31,
1996 1995 1994 1993 1992
Operating Data
---------------------------------------------------------------------------
Rental Income $164,887 $142,841 $128,133 $105,948 $89,971
Income before gain
on sale of real
estate and extra-
ordinary item 28,754 23,655 20,466 16,114 6,987
Gain (loss) on sale
of real estate (12) (545) --- --- 2,501
Extraordinary item -
gain (loss) on early
extinguishment of
debt --- --- --- 2,016 (58)
Net income 28,742 23,110 20,466 18,130 9,430
Net cash provided
by operating
activities (1) 65,648 65,117 45,199 35,183 28,236
Dividends declared 56,607 51,392 48,196 42,021 36,306
Weighted average
number of shares
outstanding 33,573 31,860 30,679 27,009 22,767
Per share:
Net income .86 .72 .67 .67 .41
Dividends declared 1.66 1.61 1.57 1.55 1.53
Other Data
---------------------------------------------------------------------------
Funds from
Operations (2) 65,254 57,034 50,404 40,824 29,374
Balance Sheet Data
---------------------------------------------------------------------------
Real estate
at cost $1,147,865 $1,009,682 $852,722 $758,088 $598,867
Total assets 1,035,306 886,154 751,804 689,803 603,365
Mortgage and
capital lease
obligations 229,189 222,317 235,705 218,545 245,694
13
Year ended December 31,
1996 1995 1994 1993 1992
Operating Data
-----------------------------------------------------------------------
Notes payable 66,106 49,980 61,883 30,519 6,117
Senior notes 215,000 165,000 --- --- 50,000
Convertible
subordinated
debentures 75,289 75,289 75,289 115,167 46,218
Shareholders'
equity 388,885 327,468 343,222 283,059 222,432
Number of shares
outstanding 35,886 32,160 31,609 28,018 24,718
(1) Determined in accordance with Financial Accounting Standards Board
Statement No. 95.
(2) Defined as income before depreciation and amortization of real estate
assets and before extraordinary items and significant nonrecurring events less
gains on sale of real estate. Funds from operations differs from net cash
provided by operating activities primarily because funds from operations does
not include changes in operating assets and liabilities. Funds from operations
is a supplemental measure of performance that does not replace net income as a
measure of performance or net cash provided by operating activities as a
measure of liquidity.
14
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
-------------------------------
Federal Realty meets its liquidity requirements through net cash provided
by operating activities, long term borrowing through debt offerings and
mortgages, medium and short term borrowing under revolving credit facilities,
and equity offerings. Because a significant portion of the Trust's net cash
provided by operating activities is distributed to shareholders, capital
outlays for property acquisitions, renovation projects and debt repayments
require funding from borrowing or equity offerings.
Operating activities generated $65.6 million in 1996, $65.1 million in
1995 and $45.2 million in 1994 of which $52.1 million, $47.9 million and
$44.0 million, respectively, was distributed to shareholders. Despite a $5.6
million increase in net income in 1996 over 1995 and a $3.4 million increase
in non-cash charges such as depreciation in 1996 over 1995, net cash provided
by operating activities increased only $500,000 because these increases to
cash were offset by an increased usage of $8.5 million in 1996 over 1995 for
other operating purposes, primarily increases in accounts receivable, prepaid
expenses and decreases in accrued expenses. Cash generated from operating
activities was $19.9 million greater in 1995 than in 1994. The increase of
$2.6 million in net income and an increase of $4.4 million in non-cash charges
such as depreciation were augmented by a decreased usage of $12.9 million in
other operating activities, primarily due to increases in accounts payable and
accrued expenses.
During the three year period 1994 through 1996, the Trust expended over
$357 million in cash to acquire properties and to improve its properties. In
addition, in 1996 the Trust invested $23.4 million in mortgage notes
receivable, most of which are convertible into ownership interests in the
properties by which they are secured. At December 31, 1996 the Trust had
deposits of $23.4 million on real estate, primarily for the purchase in
January 1997 of the fee interest on four properties which it held subject to
capital leases. These expenditures were primarily funded from the proceeds of
various debt and equity transactions.
The Trust is actively expanding its acquisition efforts. In 1996 the
Trust amended its bylaws to permit investments west of the Mississippi River.
The Trust acquired $105.6 million of retail property in 1996, comprised of
three shopping centers and fourteen retail buildings. With certain of these
purchases the Trust made its first acquisitions in Florida and California. On
October 1, the Trust acquired Saugus Plaza Shopping Center, located in
metropolitan Boston, Massachusetts for $12.7 million in cash. On October 29,
1996 Wynnewood Shopping Center in suburban Philadelphia, Pennsylvania was
purchased for a total cash cost of $21.8 million. On December 31, 1996 the
Trust acquired the controlling interest in a Limited Liability Company formed
to own Escondido Promenade in suburban San Diego, California for $14.2 million
in cash. The $23.5 million center is encumbered by $9.4 million of municipal
bonds. The bonds, which mature October 1, 2016, bear interest at a variable
rate determined weekly to be the interest rate which would enable
15
the bonds to be remarketed at 100% of their principal amount. The bonds are
redeemable on demand by the holders and if they cannot be resold, will be due.
The other member of the Limited Liability Company, who is related to the
developer of the property, has a minor interest in the profits of the company.
On February 28, 1996 the Trust purchased, for cash, two retail buildings
in Winter Park, Florida for a cost of $6.8 million. In 1996 the Trust
purchased two buildings in Greenwich, Connecticut, one for $3.2 million in
cash on May 6 and another for $9.5 million in cash on June 4. On December 31,
1996 the Trust made an investment of $17.6 million for the general partnership
interest in two partnerships (the "CIM partnerships"), one of which owns ten
main street retail buildings and the other of which owns a purchase option on
a street retail building. The ten buildings, valued at $28 million, are
located in Pasadena, Santa Monica and San Diego, California. Nine of the ten
buildings are scheduled to be renovated and retenanted. The Trust will
contribute 90% of future capital costs. The limited partners who contributed
$10.4 million to the partnerships will receive a cumulative return of $762,000
per year. All remaining income and cash available for distribution will be
allocated 90% to the Trust and 10% to the minority partners until each
receives a return of 10% on its deemed investment and then 60% to the Trust
and 40% to the minority partner.
During 1996 the Trust invested $42.4 million in improvements to its
properties; these improvements included: (1) $11.5 on the final tenant work
and construction of an additional 30,000 square feet at Congressional Plaza,
which includes the Trust's corporate offices; (2) $4.7 million on the
redevelopment and expansion of a portion of Bethesda Row; (3) $3.9 million on
the redevelopment of Brick Plaza which was begun in 1995; and (4) $2.3 million
to buy out below market leases.
In 1995 the Trust purchased 19 retail properties. The Trust also
purchased a building abutting Flourtown Shopping Center, one of its existing
centers, for $3.1 million. The Finley Square Shopping Center in suburban
Chicago, Illinois was purchased on April 27, 1995 for approximately $18.8
million in cash; Bristol Shopping Center in Bristol, Connecticut was purchased
on September 22, 1995 for $19.6 million, by assuming a $11.3 million mortgage
and by issuing common shares valued at $7.3 million with the balance in cash;
Park & Shop Center in Washington, D.C. was purchased on December 1, 1995 for
$11.2 million in cash; and on December 21, 1995 Shirlington Shopping Center in
Arlington, Virginia was purchased for $23.5 million in cash. The retail
building acquisitions during 1995 were as follows: seven buildings in West
Hartford, Connecticut for $15.3 million; two buildings in Greenwich,
Connecticut for $14.9 million; one building in Westport, Connecticut for $5.7
million; one building in Brookline, Massachusetts for $3.8 million; one
building in Westfield, New Jersey for $2.2 million; two buildings in Evanston,
Illinois for $3.6 million; and a building contiguous to Bethesda Row in
Bethesda, Maryland for $2.0 million.
During 1995, $33.8 million was expended on improvements to Trust
properties. These improvements included $3.8 million on the
16
redevelopment of Congressional Plaza in Rockville, Maryland, $5.5 million to
complete the redevelopment and retenanting of Gaithersburg Square in
Gaithersburg, Maryland and $5.8 million for the first phase of the renovation
of Brick Plaza in Brick, New Jersey.
During 1994 the Trust purchased four shopping centers and one retail
building, Idylwood Plaza in Falls Church, Virginia, North Lake Commons in Lake
Zurich, Illinois, Garden Market Shopping Center in Western Springs, Illinois,
Queen Anne Plaza in Norwell, Massachusetts and the Ship's Building in
Westport, Connecticut. In addition, the Trust purchased a 3.9 acre parcel of
land, on which there is a supermarket, which adjoins its Bala Cynwyd Shopping
Center. These properties were acquired for a total cash investment of $48.3
million and a $1.1 million note.
During 1994, $42.3 million was expended on improvements to Trust
properties. These improvements included $15.5 million on the renovation and
expansion of Congressional Plaza in Rockville, Maryland, $4.1 million to
complete the redevelopment of Ellisburg Circle Shopping Center in Cherry Hill,
New Jersey, and $3.9 million to begin the redevelopment and retenanting of
Gaithersburg Square Shopping Center in Gaithersburg, Maryland.
The majority of these acquisitions and improvements, as well as debt
repayment requirements, were initially financed with borrowings under the
Trust's revolving credit facilities. The Trust uses these credit facilities to
fund acquisitions and other cash requirements until conditions are favorable
for issuing equity or long term debt. In August 1996, the Trust amended these
unsecured medium term revolving credit facilities, increasing the aggregate
amount available from $130 million to $135 million, extending the maturity
from three years to five years, and decreasing the interest rate from LIBOR
(London Interbank Offered Rate) plus 75 to 100 basis points to LIBOR plus 75
basis points. The facilities require fees and have covenants requiring a
minimum shareholders' equity and a maximum ratio of debt to net worth. At
December 31, 1996, 1995 and 1994, $59.4 million, $40.1 million and $54.7
million, respectively, was borrowed under these facilities. The maximum amount
borrowed under these facilities during 1996, 1995 and 1994 was $76.2 million,
$66.8 million and $54.7 million, respectively. The weighted average interest
rate on borrowings during 1996, 1995 and 1994 was 6.4%, 6.9%, and 5.6%,
respectively.
Borrowings on these revolving credit facilities were repaid from a
variety of long term debt and equity issues. In August 1996 the Trust issued
$50.0 million of 7.48% Debentures due August 15, 2026, netting approximately
$49.8 million. The debentures, which pay interest semiannually on February 15
and August 15, are redeemable at par at the option of the holders on August
15, 2008 and by the Trust at any time thereafter. On May 24, 1996 the Trust
sold 1.8 million shares at $22 per share to an institutional investor, netting
approximately $39.3 million. On December 13, 1996 the Trust sold another 1.6
million shares to the public at $27 7/8 per share, netting $42.9 million.
Another three million shares were sold to an institutional investor on
February 4, 1997 for $28 per share, netting $83.9 million.
17
During 1995 the Trust issued $165 million of senior notes: $100.0 million
at 8 7/8% interest in January, netting proceeds of approximately $98.9
million; $25.0 million at 8% interest in April, netting approximately $24.9
million; and $40.0 million at 6 5/8% interest in December, netting
approximately $39.6 million. In January 1995 the Trust repaid a $22.5 million
mortgage which had been borrowed in 1994 and a $1.1 million note issued in
connection with the purchase of Queen Anne Plaza in 1994.
In order to minimize the risk of changes in interest rates, in connection
with certain of these debt issues the Trust entered into interest rate hedge
agreements. All agreements have been terminated and the cost or gain on the
hedges is being recognized as a component of interest expense over the life of
the financing.
In April 1994 the Trust raised net proceeds of $61.3 million from a
public offering of 2.5 million common shares of beneficial interest
("shares"). In a concurrent offering of 840,000 shares to an institutional
investor, the Trust raised net proceeds of $21.7 million. In April 1994 the
Trust redeemed $39.8 million principal amount of its 5 1/4% convertible
subordinated debentures due 2002 at a price equal to 120% of their principal
amount or $47.8 million. In November 1994 the Trust spent $4.2 million to
exercise the option to purchase the land at Northeast Shopping Center, $3.4
million of which had been recorded as a capital lease obligation.
The Trust has budgeted $44.0 million for capital improvements to its
properties in 1997. These improvements include: (1) $6.0 million for the next
phase of the redevelopment and expansion of Brick Plaza; (2) $6.1 million to
renovate and retenant Troy Shopping Center; (3) $4.1 million to renovate
Feasterville Shopping Center; and (4) $3.5 million to complete the renovation
and expansion of a portion of Bethesda Row.
The Trust's long term debt has varying maturity dates and in a number of
instances includes balloon payments or other contractual provisions that could
require significant repayments during a particular period. The next
significant maturity is approximately $53.5 million of mortgage obligations
which are due in 1998.
The Trust is seeking to increase its pace of acquisitions, both shopping
centers and main street retail buildings. In addition, the Trust is searching
for site acquisitions in its core markets to permit the Trust to build new
shopping centers.
The Trust will need additional capital in order to fund these
acquisitions, expansions and refinancings. Sources of this funding may be
proceeds from the sale of existing properties, additional debt and additional
equity. The timing and choice between additional debt or equity will depend
upon many factors, including the market price for the Trust's shares, interest
rates and the Trust's ratio of debt to net worth. The Trust believes that it
will be able to raise this capital as needed, based on its past success in so
doing.
18
Contingencies
-------------
As previously reported, certain of the Trust's shopping centers have some
environmental contamination. The Trust has retained an environmental
consultant to investigate contamination at a center in New Jersey. The Trust
is evaluating whether it has insurance coverage for this matter. At this time,
the Trust has not determined what the range of remediation costs might be, but
does not believe that the costs will have a material effect upon the Trust's
financial condition. The Trust has also identified chlorinated solvent
contamination at another property. The contamination appears to be linked to
the current and/or previous dry cleaner. The Trust intends to look to the
responsible parties for any remediation effort. Evaluation of this situation
is preliminary and it is impossible, at this time, to estimate the range of
remediation costs, if any.
The Trust reserved $2.0 million at closing in 1993 for environmental
issues associated with Gaithersburg Square Shopping Center. Pursuant to an
indemnity agreement entered into with the seller at closing, the Trust agreed
to take certain actions with respect to identified chlorinated solvent
contamination. The seller indemnified the Trust for certain third party claims
and government requirements related to contamination at adjacent properties.
During the fourth quarter of 1996, the reserve was reduced to $200,000 with a
corresponding reduction in the basis of land at the shopping center. The Trust
estimates that $200,000 is the cost to monitor the contaminant concentrations
in groundwater for ten years, thereby satisfying regulatory requirements, to
the best of the Trust's knowledge.
Pursuant to the provisions of the respective partnership agreements, in
the event of the exercise of put options by the other partners, the Trust
would be required to purchase the 99% limited partnership interest at
Loehmann's Plaza at its then fair market value and a 22.5% interest at
Congressional Plaza at its then fair market value.
Under the terms of the CIM partnerships, if certain leasing and revenue
levels are obtained for the properties owned by the partnerships, the limited
partners may require the Trust to purchase their partnership interests at a
formula price based upon net operating income. The purchase price may be paid
in cash or common shares of the Trust, at the election of the limited
partners. If the limited partners do not redeem their interest, the Trust may
choose to purchase the limited partnership interests upon the same terms.
Recently unfavorable trends in the retail environment have led to a
number of retail bankruptcies. A further weakening of the retail environment,
additional bankruptcies and further retail consolidations could adversely
impact the Trust, by increasing vacancies and decreasing rents. In past
difficult retail and real estate environments, the Trust has been able to
replace weak and bankrupt tenants with stronger tenants; management believes
that due to the quality of the Trust's properties there will continue to be
demand for its retail space.
19
Results of Operations
---------------------
Net income and funds from operations have been affected by the Trust's
recent acquisition, redevelopment and financing activities. The Trust has
historically reported its funds from operations in addition to its net income
and net cash provided by operating activities. Funds from operations is a
supplemental measure of real estate companies' operating performance which
excludes historical cost depreciation, since real estate values have
historically risen and fallen with market conditions rather than over time.
The National Association of Real Estate Investment Trusts (NAREIT) defines
funds from operations as follows: income before depreciation and amortization
of real estate assets and before extraordinary items and significant non-
recurring events less gains on sale of real estate. Funds from operations does
not replace net income as a measure of performance or net cash provided by
operating activities as a measure of liquidity. Rather, funds from operations
has been adopted by real estate investment trusts to provide a consistent
measure of operating performance in the industry.
The reconciliation of net income to funds from operations is as follows:
Year ended December 31,
(in thousands)
1996 1995 1994
Net income $28,742 $23,110 $20,466
Depreciation and amortization
of real estate assets 34,128 30,986 26,479
Amortization of initial direct
costs of leases 2,372 2,393 2,404
Loss on sale of real estate, extra-
ordinary and non-recurring items 12 545 1,055
------- ------- -------
Funds from operations $65,254 $57,034 $50,404
======= ======= =======
The Trust's retail leases generally provide for minimum rents, with
periodic increases. Most retail tenants pay a majority of on-site operating
expenses and real estate taxes. Many leases also contain a percentage rent
clause which calls for additional rents based on tenant sales, so that at a
given sales volume, if prices increase, so does rental income. These features
in the Trust leases reduce the Trust's exposure to higher costs caused by
inflation, although inflation has not been significant in recent years.
Rental income, which consists of minimum rent, percentage rent, and cost
recoveries, increased 11.5% in 1995 to $142.8 million from $128.1 million in
1994 and 15.4% in 1996 to $164.9 million. If centers acquired and sold in
1994, 1995 and 1996 are excluded, rental income increased 4.3% from 1994 to
1995 and 6.6% from 1995 to 1996.
Minimum rents increased 14% in 1995 to $113.9 million from $99.9 million
in 1994 and 15.5% in 1996 to $131.5 million. If
20
centers acquired and sold in 1994, 1995 and 1996 are excluded, minimum rents
increased 6.7% from 1994 to 1995 and 6.2% from 1995 to 1996. Fifty percent of
the increase in minimum rent in 1996 was from Congressional Plaza, Brick Plaza
and Gaithersburg Square, which have been redeveloped and retenanted. Thirty-
four percent of the increase in minimum rent in 1995 was from Congressional
Plaza.
Cost reimbursements consist of tenant reimbursements of real estate taxes
(real estate tax recovery) and common area maintenance expenses (CAM
recovery). After removing the effect of properties purchased and sold during
the past three years, real estate tax recovery increased 6.2% from 1994 to
1995 and 9.7% from 1995 to 1996. Forty-nine percent of the increase from 1994
to 1995 was attributable to Congressional Plaza as its occupancy increased
after being vacated for renovation. Sixty-four percent of the increase in 1996
was attributable to Congressional Plaza, Brick Plaza and Gaithersburg Square.
CAM recovery on the portfolio, adjusted to remove the effect of properties
purchased in 1994, 1995 and 1996, was $13.2 million in 1994, $11.5 million in
1995 and $13.2 million in 1996. These fluctuations correspond to fluctuations
in CAM expenses, primarily snow removal and related repairs which were high in
1994 and 1996 due to heavy snowfalls in those years.
Other property income includes items which tend to fluctuate from period
to period, such as utility reimbursements, telephone income, merchant
association dues, lease termination fees, late fees and temporary tenant
income. The increases from 1994 to 1996 were due primarily to the fluctuating
nature of the income. Major increases in 1995 over 1994 resulted from lease
termination fees, an unexpected recovery from a bankrupt tenant, merchant
association dues and a commission on telephone services. The increase from
1995 to 1996 was due to lease termination fees.
Rental expenses went from $35.8 million in 1994 to $35.1 million in 1995
to $40.7 million in 1996, which represents 26.8% of property income (rental
income plus other property income) in 1994, 23.4% in 1995 and 23.3% in 1996.
If rental expenses are adjusted to remove the effect of properties purchased
and sold in 1994, 1995 and 1996, rental expenses ranged from $35.1 million in
1994 to $32.6 million in 1995 to $35.3 million in 1996. The primary reason for
the decrease from 1994 to 1995 was a decrease in snow removal and other
related expenses, such as roof and parking lot repairs. The increase from 1995
to 1996 was caused by an increase in snow related expenses and by an increase
in the write-off of tenant work and lease commissions, often connected with
tenants whose leases were terminated. Real estate taxes have ranged from 9.0%
of property income in 1994 to 9.6% in 1995 to 9.4% in 1996. The lower
percentage in 1994 was primarily due to Congressional Plaza, which received a
refund of prior year taxes in 1994.
Depreciation and amortization expenses have increased because of the
recent acquisitions and also because of the depreciation on recent tenant work
and property improvements.
Interest income has increased slightly over the past three years. The
Trust's major sources of interest income are on its mortgage notes receivable,
its notes to officers, and its available cash balances. Increases in interest
income due to the issuance of
21
$14.3 million in mortgage notes receivable in 1996 were offset by decreases in
interest on investments in marketable securities which the Trust sold in 1995.
Included in interest income in 1995 is the effect of the sale in December 1995
of the Trust's investment in Olympia and York Senior First Mortgage Notes and
other real estate investment trusts, both of which were written down to market
value in prior years.
Interest expense increased to $45.6 million in 1996 from $39.3 million in
1995, due to interest on the $50 million of senior debentures issued in 1996
and the $165 million of senior notes issued in 1995, due to interest from
increased usage of the revolving credit facilities and due to interest on the
mortgage assumed upon the purchase of Bristol Shopping Center. Interest
expense increased from $31.5 million in 1994 to $39.3 million in 1995,
primarily due to interest on the three issues of senior notes in 1995. The
ratio of earnings to fixed charges was 1.59x, 1.55x and 1.61x in 1996, 1995
and 1994, respectively. The ratio of funds from operations to fixed charges
was 2.35x, 2.35x, and 2.52x in 1996, 1995 and 1994, respectively.
Administrative expenses have increased as the Trust has grown and as it
has accelerated its acquisition and development efforts. Administrative
expenses as a percentage of total income, however, were fairly constant, at
5.1%, 4.7% and 4.8%, in 1996, 1995 and 1994, respectively. The $1.8 million
increase from 1995 to 1996 was primarily due to the write-off of costs
associated with unconsummated acquisition and development efforts and due to
costs related to the move of the Trust's corporate office. The major
components of the increase in 1995 over 1994 were in payroll and in costs
related to a business combination that the Trust decided not to pursue.
Investors' share of operations represents the minority interest in
Congressional Plaza, Loehmann's Plaza and North City Plaza. In 1995 minority
net losses at Loehmann's and North City exceeded the minority net income at
Congressional Plaza which was under redevelopment in 1995.
Income before loss on sale of real estate and extraordinary item
increased from $20.5 million in 1994 to $23.7 million in 1995 to $28.7 million
in 1996, reflecting not only the contribution to net income from the Trust's
acquisitions but also the contribution from improved operating results of the
core portfolio.
Loss or gain on the sale of real estate is dependent on the extent and
timing of sales. The Trust regularly reviews its portfolio and does from time
to time sell properties. In 1996 the Trust sold Town & Country Plaza in
Hammond, Louisiana for $4.9 million, resulting in a loss of $12,000. In 1995
the Trust sold North City Plaza for $1.8 million resulting in a loss on sale
of $545,000.
As a result of the foregoing items, net income rose from $20.5 million in
1994 to $23.1 million in 1995 to $28.7 million in 1996.
22
The Trust intends to increase its pace of acquisitions in 1997. If
successful in so doing, these acquisitions should contribute to growth in
rental income and expenses and, thereby, net income. The growth of the core
portfolio, however, is, in part, dependent on controlling expenses, some of
which are beyond the complete control of the Trust, such as snow removal, and
trends in the retailing environment. Recently there have been a number of
retailer bankruptcies and consolidations. These bankruptcies and a further
weakening of the retail environment could adversely impact the Trust, by
increasing vacancies and by decreasing rents. In past weak retail and real
estate environments, the Trust has been able to replace weak and bankrupt
tenants with stronger tenants; management believes that due to the quality of
the Trust's properties there will continue to be demand for its retail space.
Item 8. Financial Statements and Supplementary Data.
---------------------------------------------------
Included in Item 14.
Item 9. Disagreements on Accounting and Financial Disclosure.
------------------------------------------------------------
None.
23
Part III
--------
Item 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
Executive Officers of the Registrant
------------------------------------
The Executive Officers in 1996 were:
Name Age Position with Trust
---- --- -------------------
Steven J. Guttman 50 President and Chief Executive Officer and
Trustee
Ron D. Kaplan 33 Senior Vice President-Capital Markets, Chief
Investment Officer
Catherine R. Mack 52 Vice President-General Counsel and Secretary
Mary Jane Morrow 44 Senior Vice President-Finance and Treasurer
Hal A. Vasvari 53 Executive Vice President and Chief Operating
Officer
Cecily A. Ward 50 Vice President-Controller
Robert S. Wennett 36 Senior Vice President-Acquisitions
Steven J. Guttman has been the Trust's President and Chief Executive Officer
since April 1980. Mr. Guttman has been associated with the Trust since 1972,
became Chief Operating Officer in 1975 and became a Managing Trustee in 1979.
Ron D. Kaplan joined the Trust in November 1992 as Vice President-Capital
Markets. Mr. Kaplan was formerly a Vice President of Salomon Brothers Inc
where he was responsible for capital raising and financial advisory services
for public and private real estate companies. While at Salomon Brothers which
he joined in 1987, he participated in two of the Trust's debt offerings.
Catherine R. Mack came to the Trust in January 1985 as General Counsel and
became a Vice President in February 1986. Before joining the Trust, Ms. Mack
was an Assistant United States Attorney for the District of Columbia and,
prior to that, an attorney with Fried, Frank, Harris, Shriver and Jacobson in
Washington, D.C. where she represented several local real estate entities. She
has practiced law since 1974.
Mary Jane Morrow joined the Trust in January 1987 as Vice President-Finance
and Treasurer. Before joining Federal Realty, Ms.
24
Morrow was a Partner with Grant Thornton LLP, the Trust's independent
accountants. She was with Grant Thornton LLP for over 10 years and has
extensive experience in real estate and accounting.
Hal A. Vasvari joined Federal Realty Management, Inc., the Trust's former
managing agent, in August 1985 as Executive Vice President. In January 1989,
Mr. Vasvari became Executive Vice President-Management of the Trust. In
December 1994, Mr. Vasvari was appointed Chief Operating Officer. Prior to
August 1985, he was director of leasing for Kravco Co., a developer of
shopping malls and shopping centers.
Cecily A. Ward joined the Trust in April 1987 as Controller. Prior to joining
the Trust, Ms. Ward, a certified public accountant, was with Grant Thornton
LLP, the Trust's independent accountants.
Robert S. Wennett joined the Trust's acquisitions department in April 1986.
Prior to joining the Trust, Mr. Wennett was an associate with Chemical Realty
Corporation in New York where he was involved in real estate financing for
corporate clients.
The schedule identifying Trustees under the caption "Election of Trustees" of
the 1997 Proxy Statement is incorporated herein by reference thereto.
Item 11. Executive Compensation.
-------- -----------------------
The sections entitled "Summary Compensation Table" and "Aggregated Option
Exercises in 1996 and December 31, 1996 Option Values" of the 1997 Proxy
Statement are incorporated herein by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
-------- ---------------------------------------------------------------
The section entitled "Ownership of Shares by Trustees and Officers" of the
1997 Proxy Statement is incorporated herein by reference thereto.
Item 13. Certain Relationships and Related Transactions.
-------- -----------------------------------------------
The section entitled "Certain Transactions" of the 1997 Proxy Statement is
incorporated herein by reference thereto.
25
Part IV
-------
Item 14. Exhibits, Financial Statement Page No.
-------- ----------------------------- --------
Schedules, and Reports on
-------------------------
Form 8-K
--------
(a) 1. Financial Statements
--------------------
Report of Independent Certified
Public Accountants F-2
Consolidated Balance Sheets-
December 31, 1996 and 1995 F-3
Consolidated Statements of
Operations - years ended
December 31, 1996, 1995
and 1994 F-4
Consolidated Statements of
Shareholders' Equity - years
ended December 31, 1996, 1995
and 1994 F-5
Consolidated Statements of
Cash Flows - years ended
December 31, 1996, 1995 and
1994 F-6
Notes to Consolidated
Financial Statements
(Including Selected Quarterly
Data) F-7 - F21
(a) 2. Financial Statement Schedules
-----------------------------
Schedule III - Summary of Real Estate
and Accumulated Depreciation.......................... F22 - F25
Schedule IV - Mortgage Loans on Real
Estate ............................................... F26 - F27
Report of Independent Certified
Public Accountants........................................ F28
26
(a) 3. Exhibits
--------
(3) (i) The Trust's Third Amended and Restated Declaration of
Trust dated May 24, 1984, filed with the Commission on July 5, 1984
as Exhibit 4 to the Trust's Registration Statement on Form S-2 (file
No. 2-92057) is incorporated herein by reference thereto.
(ii) Bylaws of the Trust, filed with the Commission as an
exhibit to the Trust's Current Report on Form 8-K dated February 20,
1985, as most recently amended and filed with the Commission as
portions of Item 6 to the Trust's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, is incorporated herein by
reference thereto.
(4) (i) Specimen Share of Beneficial Interest, filed with the
Commission on November 23, 1982 as Exhibit 4 to the Trust's
Registration Statement on Form S-2 (file No. 2-80524), is
incorporated herein by reference thereto.
(ii) Indenture dated March 15, 1985, relating to the Trust's
8 3/4 % Convertible Subordinated Debentures Due 2010, filed with the
Commission on March 1, 1985 as Exhibit 4 (a) (2) to the Trust's
Registration Statement on Form S-2 (File No. 2-96136) is
incorporated herein by reference thereto.
(iii) Indenture dated April 1, 1986, relating to the Trust's
8.65% Senior Notes due 1996, filed with the commission on March 27,
1986 as exhibit 4 (a) 1 to the Trust's Registration Statement on
Form S-3, (File No. 33-3934) is incorporated herein by reference
thereto.
(iv) The 5 1/4% Convertible Subordinated Debenture due 2002 as
described in Amendment No. 1 to Form S-3 (File No. 33-15264), filed
with the Commission on August 4, 1987 is incorporated herein by
reference thereto.
(v) Shareholder Rights Plan, dated April 13, 1989, filed with
the Commission as an exhibit to the Trust's Current Report on
Form 8-K, dated April 13, 1989, is incorporated herein by reference
thereto.
(vi) Indenture dated December 13, 1993, related to the Trusts's
7.48% Debentures due August 15, 2026, the Trust's 8 7/8% Senior
Notes due January 15, 2000, the Trust's 8% Notes due April 21, 2002
and the Trust's 6 5/8% Notes due 2005, filed with the commission
on December 13, 1993 as exhibit 4 (a) to the Trust's Registration
Statement on Form S-3, (File No. 33-51029) is incorporated herein by
reference thereto.
(vii) Dividend Reinvestment and Share Purchase Plan, dated
November 3, 1995, filed with the Commission on Form S-3 on November
3, 1995 (File No. 33-63955) is incorporated herein by reference
thereto.
27
(9) Voting Trust Agreement...............................*
(10) (i) Consultancy Agreement with Samuel J. Gorlitz, as amended,
filed with the Commission as Exhibit 10 (v) to the Trust's Annual
Report on Form 10-K for the year ended December 31, 1983, is
incorporated herein by reference thereto.
(ii) The Trust's 1983 Stock Option Plan adopted May 12, 1983,
filed with the Commission as Exhibit 10 (vi) to the Trust's Annual
Report on Form 10-K for the year ended December 31, 1983, is
incorporated herein by reference.
(iii) Deferred Compensation Agreement with Steven J. Guttman
dated December 13, 1978, filed with the Commission as Exhibit 10
(iv) to the Trust's Annual Report on Form 10-K for the year ended
December 31, 1980 is incorporated herein by reference thereto.
The following documents, filed with the Commission as portions of Exhibit
10 to the Trust's Annual Report on Form 10-K for the year ended December 31,
1985, are incorporated herein by reference thereto.
(iv) The Trust's 1985 Non-Qualified Stock Option Plan, adopted
on September 13, 1985
The following documents, filed with the Commission as portions of
Exhibit 10, to the Trust's Annual Report on Form 10-K for the year ended
December 31, 1980, have been modified as noted below, and are incorporated
herein by reference thereto.
(v) Consultancy Agreement with Daniel M. Lyons dated February
22, 1980, as amended (modified as of December l, 1983, to provide
for an annual cost of living increase, not to exceed 10%).
The following documents filed as portions of Exhibit 10 to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1988 are
incorporated herein by reference thereto:
(vi) The 1988 Share Bonus Plan.
(vii) Amendment No. 3 to Consultancy Agreement with Samuel J.
Gorlitz.
The following documents filed with the Commission as portions of Item 6
to the Trust's Quarterly Report on Form 10-Q for the quarter ended March 31,
1989 are incorporated herein by reference thereto;
(viii) Executive Agreement between the Trust and Steven J.
Guttman, dated April 13, 1989.
(ix) Executive Agreement between the Trust and Catherine R. Mack,
dated April 13, 1989.
28
(x) Executive Agreement between the Trust and Mary Jane
Morrow, dated April 13, 1989.
(xi) Executive Agreement between the Trust and Hal A. Vasvari,
dated April 13, 1989.
(xii) Employment Agreement between the Trust and Steven J.
Guttman, dated April 13, 1989.
(xiii) Employment Agreement between the Trust and Catherine R.
Mack, dated April 13, 1989.
(xiv) Executive Agreement between the Trust and Robert S.
Wennett, dated April 13 ,1989, modified January 1, 1990, filed with
the Commission as a portion of Exhibit 10 to the Trust's Annual
Report on Form 10-K for the year ended December 31, 1989 is
incorporated herein by reference thereto.
(xv) The 1991 Share Purchase Plan, dated January 31, 1991,
filed with the Commission as a portion of Exhibit 10 to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1990 is
incorporated herein by reference thereto.
(xvi) Employment Agreement between the Trust and Robert S.
Wennett, dated January 1, 1992, filed with the Commission as an
exhibit to the Trust's Annual Report on Form 10-K for the year ended
December 31, 1991 is incorporated herein by reference thereto.
(xvii) Amendment No. 4 to Consultancy Agreement with Samuel J.
Gorlitz, filed with the Commission as an exhibit to the Trust's
Annual Report on Form 10-K for the year ended December 31, 1992 is
incorporated herein by reference thereto.
(xviii) Employment and Relocation Agreement between the Trust and
Ron D. Kaplan, dated September 30, 1992, filed as an exhibit to the
Trust's Annual Report on Form 10-K for the year ended December 31,
1992 is incorporated herein by reference thereto.
(xix) Amendment dated October 1, 1992, to Voting Trust Agreement
dated as of March 3, 1989 by and between I. Wolford Berman and
Dennis L. Berman filed as an exhibit to the Trust's Annual Report on
Form 10-K for the year ended December 31, 1992 is incorporated
herein by reference thereto.
(xx) 1993 Long-Term Incentive Plan and Certified Resolution
Re: Amendment to 1993 Long-Term Incentive Plan, filed with the
Commission as portions of Item 6 to the Trust's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993, are incorporated
herein by reference thereto.
29
The following documents, filed with the Commission as portions of Item 6 to
the Trust's Quarterly Report on Form 10-Q for the quarter ended September 30,
1993 are incorporated herein by reference thereto:
(xxi) Revolving Credit Agreement dated as of September 1, 1993
among Federal Realty Investment Trust and Corestates Bank.
(xxii) Credit Agreement dated as of August 25, 1993 between
Federal Realty Investment Trust and First Union National Bank of
Virginia.
(xxiii) Revolving Credit Agreement dated as of June 22, 1993
between Federal Realty Investment Trust and Signet Bank/Maryland.
(xxiv) Consulting Agreement between Misner Development and
Federal Realty Investment Trust.
(xxv) Fiscal Agency Agreement dated as of October 28, 1993
between Federal Realty Investment Trust and Citibank, N.A.
(xxvi) Credit Agreement dated as of February 11, 1994 between
Federal Realty Investment Trust and Mellon Bank as filed as an
exhibit to the Trust's Annual Report on Form 10-K for the year ended
December 31, 1993 is incorporated herein by reference thereto.
(xxvii) Other Share Award and Purchase Note between Federal Realty
Investment Trust and Ron D. Kaplan, dated January 1, 1994, filed
with the Commission as a portion of Item 6 to the Trust's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994 is
incorporated herein by reference thereto.
(xxviii) Amended and Restated 1983 Stock Option Plan of Federal
Realty Investment Trust and 1985 Non-Qualified Stock Option Plan of
Federal Realty Investment Trust, filed with the Commission on August
17, 1994 on Form S-8, (File No. 33-55111) is incorporated herein by
reference thereto.
The following documents, filed with the Commission as portions of Exhibit 10
to the Trust's Annual Report on Form 10-K for the year ended December 31,
1994, are incorporated herein by reference thereto:
(xxix) Form of Severance Agreement between Federal Realty
Investment Trust and Certain of its Officers dated
December 31, 1994.
(xxx) Credit Agreement dated as of September 30, 1994 between
Federal Realty Investment Trust and First Union National Bank of
Virginia.
30
(xxxi) Second Amendment to Revolving Credit Agreement dated as of
September 30, 1994 between Federal Realty Investment Trust and
Corestates Bank.
(xxxii) First Amendment to Credit Agreement dated September 30,
1994 between Federal Realty Investment Trust and Mellon Bank.
(xxxiii) First Amendment to Revolving Credit Agreement dated
September 30, 1994 between Federal Realty Investment Trust and
Signet Bank/Maryland.
(xxxiv) Exclusive Brokerage Agreement between Street Retail Inc.
and Westport Advisors Corporation filed as an exhibit to the Trust's
Quarterly Report on Form 10-Q for quarter ended March 31, 1995 is
incorporated herein by reference thereto.
The following documents, filed with the Commission as portions of Item 6 to
the Trust's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995 are incorporated herein by reference thereto:
(xxxv) Non-Exclusive Brokerage Agreement between Federal Realty
Investment Trust and Westport Advisors Corporation and Jack Alan
Guttman dated August 20, 1995.
(xxxvi) Exclusive Brokerage Agreement between Street Retail, Inc.
and Westport Advisors Corporation and Jack Alan Guttman dated August
20, 1995.
The following are filed as exhibits hereto:
(xxxvii) Non-Exclusive Brokerage Agreement between Federal Realty
Investment Trust, Street Retail, Inc., Westport Realty Advisors,
Inc. and Jack Alan Guttman, dated December 3, 1996.
(xxxviii) Second and Third Amendments dated as of August 1, 1996 to
the Credit Agreement dated as of September 30, 1994 between Federal
Realty Investment Trust and First Union National Bank of Virginia.
(xxxvix) Third Amendment to Revolving Credit Agreement between
Federal Realty Investment Trust and Corestates Bank dated July 1,
1996.
(xl) Third Amendment to Revolving Credit Agreement as of August 7,
1996 by and between Federal Realty Investment Trust and Signet Bank.
(xli) Fourth Amendment to Credit Agreement as of August 9,
1996 by and between Federal Realty Investment Trust and
Mellon Bank.
(11) Statement regarding computation of per share
earnings.........................................*
(12) Statements regarding computation of ratios.......*
31
(13) Annual Report to Shareholders, Form 10Q or quarterly report to
shareholders...................................................*
(18) Letter regarding change in accounting principles...............*
(19) Report furnished to security holders...........................*
(21) Subsidiaries of the registrant.................................
(xxxvii) Articles of Incorporation of Street Retail, Inc. filed with
the Commission as a portion of Exhibit 21 to the Trust's Annual
Report on Form 10-K for the year ended December 31, 1994 is
incorporated herein by reference thereto.
(xxxviii) By-Laws of Street Retail, Inc. filed with the Commission
as a portion of Exhibit 21 to the Trust's Annual Report on Form 10-K
for the year ended December 31, 1994 is incorporated herein by
reference thereto.
(22) Published report regarding matters submitted to vote of security
holders........................................................*
(23) Consent of Grant Thornton LLP..................................
(24) Power of attorney..............................................*
(27) Financial Data Schedule........................................+
(99) Additional exhibits............................................*
(b) Reports on Form 8-K Filed during the Last Quarter
-------------------------------------------------
A Form 8-K, dated November 15, 1996, was filed in response to
Item 7.(c)99
A Form 8-K, dated December 10, 1996 was filed in response to Item 5.
---------
* Not applicable.
+ For Edgar filing only.
32
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FEDERAL REALTY INVESTMENT TRUST
Date: February 18, 1997 By:/s/ Steven J. Guttman
---------------------------
Steven J. Guttman
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Steven J. Guttman President and February 18, 1997
- --------------------------- Trustee (Chief -----------------
Steven J. Guttman Executive Officer)
/s/ Mary Jane Morrow Senior Vice-President February 18, 1997
- --------------------------- and Treasurer (Chief -----------------
Mary Jane Morrow Financial Officer)
/s/ Cecily A. Ward Vice-President and February 18, 1997
- --------------------------- Controller (Principal -----------------
Cecily A. Ward Accounting Officer)
/s/ Dennis L. Berman Trustee February 18, 1997
- --------------------------- -----------------
Dennis L. Berman
Trustee
- --------------------------- February 18, 1997
A. Cornet de Ways Ruart -----------------
/s/ Samuel J. Gorlitz Trustee February 18, 1997
- --------------------------- -----------------
Samuel J. Gorlitz
/s/ Kristin Gamble Trustee February 18, 1997
- --------------------------- -----------------
Kristin Gamble
/s/ Walter F. Loeb Trustee February 18, 1997
- --------------------------- -----------------
Walter F. Loeb
- --------------------------- Trustee February 18, 1997
Donald H. Misner -----------------
/s/ Mark S. Ordan Trustee February 18, 1997
- --------------------------- -----------------
Mark S. Ordan
/s/ George L. Perry Trustee February 18, 1997
- --------------------------- -----------------
George L. Perry
33
FINANCIAL STATEMENTS AND
SCHEDULES
F1
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Trustees and Shareholders
Federal Realty Investment Trust
We have audited the accompanying consolidated balance sheets of Federal Realty
Investment Trust as of December 31, 1996 and 1995, and the related
consolidated statements of operations, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Federal Realty
Investment Trust as of December 31, 1996 and 1995 and the consolidated results
of its operations and its consolidated cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
Grant Thornton LLP
Washington, D.C.
February 5, 1997
F2
Federal Realty Investment Trust
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1996 1995
------------- --------------
ASSETS (in thousands)
Investments
Real estate, at cost $1,147,865 $1,009,682
Less accumulated depreciation and amortization (223,553) (190,795)
--------- --------
924,312 818,887
Mortgage notes receivable 27,913 13,561
--------- --------
952,225 832,448
Other Assets
Cash 11,041 10,521
Notes receivable - officers 1,183 1,011
Accounts receivable 16,111 15,091
Prepaid expenses and other assets, principally deposits on real estate,
property taxes and lease commissions 51,374 23,248
Debt issue costs 3,372 3,835
--------- --------
$1,035,306 $ 886,154
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Obligations under capital leases $ 130,613 $ 131,829
Mortgages payable 98,576 90,488
Notes payable 66,106 49,980
Accrued expenses 20,405 19,048
Accounts payable 6,783 8,571
Dividends payable 15,072 13,191
Security deposits 3,515 3,083
Prepaid rents 3,801 787
Senior notes and debentures 215,000 165,000
5 1/4% Convertible subordinated debentures 75,289 75,289
Investors' interest in consolidated assets 11,261 1,420
Commitments and contingencies - -
Shareholders' equity
Common shares of beneficial interest, no par
or stated value, unlimited authorization,
issued 35,948,044 and 32,221,670 shares,
respectively 597,917 508,870
Accumulated dividends in excess of Trust net income (200,700) (172,835)
--------- --------
397,217 336,035
Less 62,386 and 61,328 common shares in treasury - at cost, respectively,
deferred compensation and subscriptions receivable (8,332) (8,567)
--------- --------
388,885 327,468
--------- --------
$1,035,306 $ 886,154
========= ========
The accompanying notes are an integral part of these statements.
F-3
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31,
1996 1995 1994
----------- ----------- -----------
(In thousands, except per share data)
Revenue
Rental income $164,887 $142,841 $128,133
Interest 4,352 4,113 3,933
Other property income 9,816 7,435 5,698
--------- --------- ---------
179,055 154,389 137,764
Expenses
Rental 40,687 35,093 35,830
Real estate taxes 16,411 14,471 12,097
Interest 45,555 39,268 31,462
Administrative 9,100 7,305 6,661
Other charges - - 1,055
Depreciation and amortization 38,154 34,901 29,801
--------- --------- ---------
149,907 131,038 116,906
--------- --------- ---------
Operating income before investors' share
of operations and loss on sale of real estate 29,148 23,351 20,858
Investors' share of operations (394) 304 (392)
--------- --------- ---------
Income before loss on sale of real estate 28,754 23,655 20,466
Loss on sale of real estate (12) (545) -
--------- --------- ---------
Net income $28,742 $23,110 $20,466
========= ========= =========
Weighted Average Number of Common Shares 33,573 31,860 30,679
========= ========= =========
Earnings per share
Income before loss on sale of real estate $0.86 $0.74 $0.67
Loss on sale of real estate - (0.02) -
--------- --------- ---------
$0.86 $0.72 $0.67
========= ========= =========
The accompanying notes are an integral part of these statements.
F-4
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Year ended December 31,
1996 1995
----------------- ------------- ------------ --------------
(In thousands, except share amounts) Shares Amount Shares Amount
Common Shares of Beneficial Interest
Balance, beginning of year 32,221,670 $508,870 31,669,434 $496,958
Exercise of stock options 126,918 2,705 20,744 390
Shares issued under dividend reinvestment plan 181,274 4,057 193,965 4,181
Conversion of 5 1/4% subordinated debentures due 2002 - - - -
Shares purchased under share purchase plan - - - -
Shares issued to purchase shopping center 337,527 7,341
Net proceeds from sale of shares 3,418,182 82,285 - -
---------- -------- ---------- --------
Balance, end of year 35,948,044 $597,917 32,221,670 $508,870
========== ======== ========== ========
Common Shares of Beneficial Interest
in Treasury, Deferred Compensation and
Subscriptions Receivable
Balance, beginning of year (500,095) ($8,567) (539,188) ($9,130)
Amortization of deferred compensation 30,250 482 32,875 547
Net (increase) decrease in stock option loans (10,167) (242) 5,971 20
Purchase of treasury shares (2,186) (24) (1,128) (25)
Purchase (subscription) under share purchase plan 1,250 19 1,375 21
---------- -------- ---------- --------
Balance, end of year (480,948) ($8,332) (500,095) ($8,567)
========== ======== ========== ========
Accumulated Dividends in Excess of Trust Net Income
Balance, beginning of year ($172,835) ($144,553)
Net income 28,742 23,110
Dividends declared to shareholders (56,607) (51,392)
-------- --------
Balance, end of year ($200,700) ($172,835)
======== ========
Year ended December 31,
1994
------------ ----------
(In thousands, except share amounts) Shares Amount
Common Shares of Beneficial Interest
Balance, beginning of year 28,077,999 $408,005
Exercise of stock options 47,240 1,035
Shares issued under dividend reinvestment plan 162,466 3,891
Conversion of 5 1/4% subordinated debentures due 2002 1,729 64
Shares purchased under share purchase plan 40,000 1,000
Shares issued to purchase shopping center - -
Net proceeds from sale of shares 3,340,000 82,963
---------- --------
Balance, end of year 31,669,434 $496,958
========== ========
Common Shares of Beneficial Interest
in Treasury, Deferred Compensation and
Subscriptions Receivable
Balance, beginning of year (496,499) ($7,759)
Amortization of deferred compensation 27,875 422
Net (increase) decrease in stock option loans (30,564) (793)
Purchase of treasury shares - -
Purchase (subscription) under share purchase plan (40,000) (1,000)
--------- -------
Balance, end of year (539,188) ($9,130)
======== =======
Accumulated Dividends in Excess of Trust Net Income
Balance, beginning of year ($116,823)
Net income 20,466
Dividends declared to shareholders (48,196)
---------
Balance, end of year ($144,553)
=========
The accompanying notes are an integral part of these statements.
F-5
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31,
(In thousands) 1996 1995 1994
-----------------------------------------------
OPERATING ACTIVITIES
Net income $28,742 $23,110 $20,466
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 38,153 34,900 29,801
Rent abatements in lieu of leasehold improvements,
net of tenant improvements retired (121) (951) (812)
Imputed interest and amortization of debt cost 696 731 547
Amortization of deferred compensation and
forgiveness of officers' notes 496 531 621
Write-down of investments - - 1,207
Loss on sale of real estate 12 545 -
Payment of trustees' fees in shares 104 136 132
Changes in assets and liabilities
Decrease (increase) in accounts receivable (1,020) 932 (400)
Increase in prepaid expenses and other
assets before depreciation and amortization (7,665) (4,768) (4,674)
Increase (decrease) in operating accounts payable,
security deposits and prepaid rent 3,133 1,453 (1,161)
Increase (decrease) in accrued expenses, net of the premium
put on the 5 1/4% convertible subordinated debentures in 1994 3,118 8,498 (528)
-------- -------- -------
Net cash provided by operating activities 65,648 65,117 45,199
INVESTING ACTIVITIES
Acquisition of real estate (85,792) (105,096) (48,337)
Capital expenditures (42,356) (33,829) (42,286)
Deposit on purchase of real estate (23,401) - -
(Issuance) of mortgage notes receivable, net (14,352) (383) (7)
Issuance of notes receivable - officers, net (188) (215) (116)
Proceeds from sale of real estate 4,680 1,782 -
Net (increase) decrease in temporary investments (410) 3,381 281
-------- -------- -------
Net cash used in investing activities (161,819) (134,360) (90,465)
FINANCING ACTIVITIES
Proceeds of mortgage financings - - 22,500
Regular payments on mortgages, capital leases and notes payable (2,735) (2,289) (2,080)
Balloon payments on mortgages and capital leases,
including prepayment fees (3,000) (23,601) (3,400)
Borrowing (repayment) of short-term debt, net 19,290 (14,635) 30,332
Redemption of 5 1/4% convertible debentures due 2002, including
premium put - - (47,790)
Issuance (redemption) of senior notes, net of costs 49,749 163,384 -
Dividends paid (52,084) (47,918) (43,973)
Issuance of shares 86,054 1,682 84,247
Decrease in minority interest, net (583) (854) (210)
-------- -------- -------
Net cash provided by financing activities 96,691 75,769 39,626
-------- -------- -------
Increase (decrease) in cash 520 6,526 (5,640)
Cash at beginning of year 10,521 3,995 9,635
-------- -------- -------
Cash at end of year $11,041 $10,521 $3,995
======== ======== =======
The accompanying notes are an integral part of these statements.
F-6
Federal Realty Investment Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995, and 1994
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Federal Realty Investment Trust invests in income-producing real estate
properties. Traditionally it focused on community and neighborhood shopping
centers, but beginning in late 1994 the Trust expanded its investments to
main street retail properties, retail buildings and shopping centers in
densely developed urban and suburban areas. The Trust's leases with tenants
are classified as operating leases and rental income is recognized on an
accrual basis over the terms of the related leases.
The Trust uses the straight-line method in providing for depreciation.
Estimated useful lives range from three to 25 years on apartment buildings and
improvements, and from three to 35 years on retail properties and
improvements. Maintenance and repair costs are charged to operations as
incurred. Major improvements are capitalized. The gain or loss resulting
from the sale of properties is included in net income at the time of sale.
The Trust has adopted FAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of". The Trust does not hold
any assets that meet the impairment criteria of FAS 121.
The Trust capitalizes certain costs directly related to the acquisition,
improvement and leasing of real estate including applicable salaries and other
related costs. The capitalized costs associated with unsuccessful
acquisitions are charged to operations when that determination is made. The
capitalized costs associated with improvements and leasing are depreciated or
amortized over the life of the improvement and lease, respectively.
Costs related to the issuance of debt instruments are capitalized and are
amortized as interest expense over the life of the related issue using the
interest method. Upon conversion or in the event of redemption, applicable
unamortized costs are charged to shareholders' equity or to operations,
respectively.
The Trust operates in a manner intended to enable it to qualify as a real
estate investment trust under Sections 856-860 of the Internal Revenue Code
(the "Code"). Under those sections, a trust which distributes at least 95% of
its real estate trust taxable income to its shareholders each year and which
meets certain other conditions will not be taxed on that portion of its
taxable income which is distributed to its shareholders. Therefore, no
provision for Federal income taxes is required.
The Trust consolidates the financial statements of three wholly owned
subsidiaries, eleven partnerships, and a joint venture which are controlled by
the Trust. The equity interests of other investors are reflected as investors'
interest in
F7
consolidated assets. All significant intercompany transactions and balances
are eliminated.
The Trust defines cash as cash on hand, demand deposits with financial
institutions and short term liquid investments with an initial maturity under
three months. Cash balances may exceed insurable amounts.
The Trust occasionally enters into derivative contracts with terms up to
90 days prior to a scheduled financing or refinancing in order to minimize the
risk of changes in interest rates. The cost or gain on these transactions is
recognized as a component of interest expense over the life of the financing.
Earnings per share are computed using the weighted average number of
shares outstanding during the respective periods, including options. Options
are accounted for in accordance with APB 25, whereby if options are priced at
fair market value or above at the date of grant, no compensation expense is
recognized.
Inherent in the preparation of the Trust's financial statements are
certain estimates. These estimates are prepared using management's best
judgment, after considering past and current events.
NOTE 1: REAL ESTATE AND ENCUMBRANCES
A summary of the Trust's properties at December 31, 1996 is as
follows:
Accumulated
depreciation and
Cost amortization Encumbrances
----------- ------------ ------------
(in thousands)
Retail properties $ 926,266 $158,754 $ 98,576
Retail properties
under capital leases 215,173 60,229 130,613
Apartments 6,426 4,570 -
---------- -------- ------------
$1,147,865 $223,553 $229,189
========== ======== ============
The Trust's 86 retail properties are located in 14 states and the
District of Columbia, primarily along the East Coast between the Boston
metropolitan area and Richmond, Virginia. There are approximately 1,800
tenants providing a wide range of retail products and services. These tenants
range from sole proprietorships to national retailers; no one tenant or
corporate group of tenants account for 5% or more of revenue.
In 1996 the Trust acquired $105.6 million of retail property, comprised
of three shopping centers and fourteen retail buildings. With certain of
these purchases the Trust made its first acquisitions in Florida and
California.
F8
On October 1, 1996 the Trust acquired Saugus Plaza Shopping Center,
located in the metropolitan Boston, Massachusetts area, for a total cash cost
of $12.7 million. On October 29, 1996 Wynnewood Shopping Center in suburban
Philadelphia, Pennsylvania was purchased for a total cash cost of $21.8
million. On December 31, 1996 the Trust acquired the controlling interest in
a Limited Liability Company formed to own Escondido Promenade in suburban San
Diego, California for $14.2 million in cash. The $23.5 million center is
encumbered by $9.4 million of municipal bonds. The bonds, which mature
October 1, 2016, bear interest at a variable rate determined weekly to be the
interest rate which would enable the bonds to be remarketed at 100% of their
principal amount. The bonds are redeemable on demand by the holders and if
they cannot be resold, will be due. The other member of the Limited Liability
Company, who is related to the developer of the property, has a minor interest
in the profits of the property.
On February 28, 1996 the Trust purchased, for cash, two retail buildings
in Winter Park, Florida for a cost of $6.8 million. In 1996 the Trust
purchased two buildings in Greenwich, Connecticut, one for $3.2 million in
cash on May 6 and another for $9.5 million in cash on June 4. On December 31,
1996 the Trust made an investment of $17.6 million for the general partnership
interest in two partnerships (the "CIM partnerships"), one of which owns ten
street retail buildings and the other of which owns a purchase option on a
street retail building. The ten buildings, valued at $28 million, are located
in Pasadena, Santa Monica and San Diego, California. Nine of the ten
buildings are scheduled to be renovated and retenanted. The Trust will
contribute 90% of future capital costs. The limited partners who contributed
$10.4 million to the partnerships will receive a cumulative return of $762,000
per year. All remaining income and cash available for distribution will be
allocated 90% to the Trust and 10% to the minority partner until each receives
a return of 10% on its deemed investment and then 60% to the Trust and 40% to
the minority partner.
The Trust purchased 19 retail properties during 1995 for a total cost of
$120.6 million. The Trust also purchased a building abutting Flourtown
Shopping Center, one of its existing centers, for $3.1 million. Finley Square
Shopping Center in suburban Chicago was purchased on April 27, 1995 for $18.8
million in cash; Bristol Shopping Center in Bristol, Connecticut was purchased
on September 22, 1995 for $19.6 million, by assuming a $11.3 million mortgage
and by issuing 337,527 common shares valued at $7.3 million with the balance
in cash; Park & Shop Center in Washington, D.C. was purchased on December 1,
1995 for $11.2 million in cash; and on December 21, 1995 Shirlington Shopping
Center in Arlington, Virginia was purchased for $23.5 million in cash. The
retail building acquisitions during 1995 were as follows: seven buildings in
West Hartford, Connecticut for $15.3 million; two buildings in Greenwich,
Connecticut for $14.9 million; one building in Westport, Connecticut for $5.7
million; one building in Brookline, Massachusetts for $3.8 million; one
building in Westfield, New Jersey for $2.2 million; two buildings in Evanston,
Illinois for $3.6 million and one building in Bethesda, Maryland, for $2.0
million.
F9
In connection with certain of these purchases in 1996 and 1995, brokerage
commissions of $172,000 and $671,000, respectively, were incurred to a company
that is owned by a brother of the Trust's president. These commissions were
paid pursuant to a brokerage contract on terms comparable to terms contained
in contracts which the Trust has with brokers providing similar services in
other geographic areas.
On December 31, 1996 the Trust sold Town and Country Shopping Center in
Hammond, Louisiana for $4.9 million, resulting in a loss of $12,000.
On August 1, 1995 the Trust sold North City Shopping Center in New
Castle, Pennsylvania for $1.8 million, resulting in a loss of $545,000.
The Trust purchased four shopping centers in 1994. Idylwood Plaza in
Falls Church, Virginia was purchased for $14.3 million in cash; North Lake
Commons in Lake Zurich, Illinois was purchased for $10.9 million in cash;
Garden Market Shopping Center in Western Springs, Illinois was purchased for
$7.6 million in cash; and Queen Anne Plaza in Norwell, Massachusetts was
purchased for $10.7 million in cash and a $1.1 million note which was paid in
January 1995. In addition the Trust purchased a 3.9 acre parcel of land
underlying a supermarket which adjoins its Bala Cynwyd Shopping Center for
cash of $1.1 million and a retail building in Westport, Connecticut for cash
of $3.8 million.
On April 22, 1996 the Trust made a $9.2 million convertible participating
loan to a partnership, secured by retail properties in Philadelphia,
Pennsylvania. The loan bears interest at 10% plus additional interest based
upon the gross income of the secured properties. In addition, upon sale of
the properties, the Trust will share in the appreciation of the properties.
From and after April 2006, which date may be extended to April 2008, the Trust
has the option to convert the loan into a partnership interest in the
properties. In 1995 and 1996 the Trust made additional loans, totalling $1.8
million, secured by properties in Philadelphia, to partnerships with common
ownership to the partnership above. One loan bears interest at the greater of
prime plus 2% or 10% and the other bears interest at 5%. Both loans are due in
November 1997.
On July 2, 1996 the Trust was granted a purchase option on a parcel of
land in Bethesda, Maryland in exchange for a refundable deposit of $50,000 and
a $3.6 million loan secured by the land. The loan requires monthly payments
of interest at 9% until March 31, 1997 and 9.5% thereafter. The Note is due
on the earlier of the exercise of the purchase option or March 31, 1998.
The Trust held two other mortgage loans at December 31, 1996, 1995 and
1994. The notes, which total approximately $13.2 million, bear interest at
10% and were issued in connection with the acquisition of Trust properties.
F10
In January 1994 a $22.5 million one year mortgage was placed on Northeast
Plaza in Atlanta, Georgia. The mortgage, which bore interest at LIBOR (London
Interbank Offered Rate), plus 100 to 150 basis points was repaid in January
1995.
At December 31, 1996 the Trust had contracted to purchase the fee
interest in Shillington, Troy and Feasterville Shopping Centers in January
1997 for $1.8 million, $5.5 million and $2.1 million, respectively. The Trust
had also contracted to purchase the fee interest in Lawrence Park Shopping
Center in June 1998 for $8.5 million. In connection with the purchase
agreement for Lawrence Park, the Trust, in January 1997, lent the seller $8.8
million at 8% which is due in June 1998. Future minimum lease payments due
for Lawrence Park are $847,000 in 1997 and $438,000 in 1998 of which $346,000
and $158,00, respectively represent interest. These properties are subject to
capital lease obligations of $7.6 million at December 31, 1996.
In November 1994 the Trust exercised an option to purchase the ground
underlying the Northeast Shopping Center in Philadelphia, Pennsylvania for
$4.2 million, $3.4 million of which had been recorded as a capital lease
obligation.
Mortgages payable and capital lease obligations are due in installments
over various terms extending to 2060 with actual or imputed interest rates
ranging from 7.9% to 11.25%. Certain of the mortgage and capital lease
obligations require additional interest payments based upon property
performance.
Aggregate mortgage principal payments due during the next five years are
$1.4 million, $54.5 million, $532,000, $583,000, and $30.7, respectively.
Future minimum lease payments and their present value for property under
capital leases as of December 31, 1996, excluding the four leases to be
purchased in 1997 and 1998, are as follows:
Year ending December 31, (in thousands)
1997 $ 11,297
1998 11,299
1999 11,299
2000 11,736
2001 11,736
Thereafter 537,734
---------
595,101
Less amount representing interest (472,064)
---------
Present value $ 123,037
=========
Leasing Arrangements
--------------------
The Trust's leases with retail property and apartment tenants are
classified as operating leases. Leases on apartments are generally for a
period of one year, whereas retail property leases generally range from three
to 10 years and usually provide for contingent rentals based on sales and
sharing of certain operating costs.
F11
The components of rental income are as follows:
(in thousands) Year ended December 31,
1996 1995 1994
---- ---- ----
Retail properties
Minimum rents $129,077 $111,454 $ 97,503
Cost reimbursements 28,805 23,961 23,774
Percentage rent 4,550 4,977 4,478
Apartments - rents 2,455 2,449 2,378
-------- -------- --------
$164,887 $142,841 $128,133
======== ======== ========
The components of rental expense are as follows:
(in thousands) Year ended December 31,
1996 1995 1994
---- ---- ----
Management fees and costs $7,264 $ 5,707 $ 5,316
Repairs and maintenance 11,865 8,140 9,238
Utilities 5,350 4,936 4,981
Payroll - properties 3,032 3,230 4,094
Ground rent 2,851 2,852 2,510
Insurance 2,183 2,281 1,879
Other operating 8,142 7,947 7,812
-------- -------- --------
$ 40,687 $ 35,093 $ 35,830
======== ======== ========
Minimum future retail property rentals on noncancelable operating leases
as of December 31, 1996 are as follows:
Year ending December 31, (in thousands)
1997 $130,094
1998 120,786
1999 110,038
2000 97,093
2001 82,095
Thereafter 405,109
--------
$945,215
========
NOTE 2. FAIR VALUE OF FINANCIAL INSTRUMENTS
-------------------------------------------
The following disclosure of estimated fair value was determined by the
Trust, using available market information and appropriate valuation methods.
Considerable judgment is necessary to develop estimates of fair value. The
estimates presented herein are not necessarily indicative of the amounts that
could be realized upon disposition of the financial instruments.
The Trust estimates the fair value of its financial instruments using the
following methods and assumptions: (1) quoted market prices, when available,
are used to estimate the fair value of investments in marketable debt and
equity securities; (2) quoted market prices are used to estimate the fair
value of the Trust's marketable convertible subordinated debentures; (3)
discounted cash flow analyses are used to
F12
estimate the fair value of long term notes receivable and payable, using the
Trust's estimate of current interest rates for similar notes; (4) carrying
amounts in the balance sheet approximate fair value for cash and short term
borrowings. Notes receivable from officers are excluded from fair value
estimation since they have been issued in connection with employee stock
ownership programs.
December 31, 1996 December 31, 1995
(in thousands) Carrying Fair Carrying Fair
Value Value Value Value
----------------- -----------------
Cash & equivalents $11,041 $11,041 $10,521 $10,521
Investments 671 671 261 261
Mortgage notes
receivable 27,913 28,945 13,561 15,027
Mortgages and notes
payable 164,682 168,276 140,468 146,801
Convertible
debentures 75,289 68,889 75,289 66,932
Senior notes 215,000 221,635 165,000 176,653
NOTE 3. NOTES PAYABLE
---------------------
At December 31, 1996 and 1995 the Trust had notes payable of $66.1
million and $50.0 million, respectively. Of these balances, $59.4 million in
1996 and $40.1 million in 1995 were issued under the Trust's revolving credit
facilities.
The remaining balance of notes payable was issued in connection with the
acquisition, leasing or renovation of properties. A $2.5 million noninterest
bearing note was issued in September 1995 in connection with a lease
transaction at Barracks Road. The due date of this note has been extended from
December 1996 to July 15, 1997. A note, with a balance of $1.3 million at
December 31, 1996 and $1.4 million at December 31, 1995, was issued in
connection with the buy out of a tenant at Queen Anne Plaza in January 1995.
The noninterest bearing note of $2.2 million, due in annual installments of
$200,000 for eleven years, was recorded at its discounted value using an
interest rate of 8 7/8%.
A 10% note, payable in equal monthly installments with a final maturity
in 2013, issued in connection with the renovation of Perring Plaza had a
balance of $2.9 million in 1996 and 1995. A $3 million note issued in
connection with the acquisition of Federal Plaza, bearing interest at 11%, was
paid in 1996.
In August 1996 the Trust amended its unsecured medium term revolving
credit facilities with four banks, increasing the aggregate amount available
from $130 million to $135 million, extending the maturity from three years to
five, and decreasing the interest rate from LIBOR plus 75 to 100 basis points
to LIBOR plus 75 basis points. The facilities require fees and have covenants
requiring a minimum shareholders' equity and a maximum ratio of debt to net
worth.
F13
The maximum drawn under these facilities during 1996, 1995 and 1994 was
$76.2 million, $66.8 million, and $54.7 million, respectively. In 1996, 1995
and 1994 the weighted average interest rate on borrowings was 6.4%, 6.9% and
5.6%, respectively, and the average amount outstanding was $47.2 million,
$26.7 million and $26.3 million, respectively.
NOTE 4. DIVIDENDS
-----------------
On November 20, 1996 the Trustees declared a quarterly cash dividend of
$.42 per share, payable January 15, 1997 to shareholders of record January 2,
1997. For the years ended December 31, 1996, 1995 and 1994, $.21, $.43 and
$.75 of dividends paid per share, respectively, represented a return of
capital.
NOTE 5. COMMITMENTS AND CONTINGENCIES
-------------------------------------
Pursuant to the provisions of the Loehmann's Plaza Limited Partnership
Agreement, on or after September 1, 1995 the limited partner may require the
Trust to purchase his interest in the Partnership at its then fair market
value.
The Congressional Plaza Shopping Center Joint Venture Agreement provides
that upon six months advance notice the Trust can be required to purchase its
pro rata share of one venturer's 22.5% or greater joint venture interest for a
purchase price based on the appraised fair market value of the shopping
center, but no less than the percentage of joint venture interest being sold
multiplied by the difference between $17.5 million and the remaining principal
balance of any liabilities of the Joint Venture.
Under the terms of the CIM partnerships, if certain leasing and revenue
levels are obtained for the properties owned by the partnerships, the limited
partners may require the Trust to purchase their partnership interests at a
formula price based upon net operating income. The purchase price may be paid
in cash or common stock of the Trust at the election of the limited partners.
If the limited partners do not redeem their interest, the Trust may choose to
purchase the limited partnership interests upon the same terms.
As previously reported, certain of the Trust's shopping centers have some
environmental contamination. The Trust has retained an environmental
consultant to investigate contamination at a shopping center in New Jersey.
The Trust is evaluating whether it has insurance coverage for this matter. At
this time, the Trust has not determined what the range of remediation costs
might be, but does not believe that the costs will have a material effect upon
the Trust's financial condition. The Trust has also identified chlorinated
solvent contamination at another property. The contamination appears to be
linked to the current and/or previous dry cleaner. The Trust intends to look
to the responsible parties for any remediation effort. Evaluation of this
situation is preliminary and it is impossible, at this time, to estimate the
range of remediation costs, if any.
F14
The Trust reserved approximately $2.0 million at closing in 1993 for
environmental issues associated with Gaithersburg Square Shopping Center.
Pursuant to an indemnity agreement entered into with the seller at closing,
the Trust agreed to take certain actions with respect to identified
chlorinated solvent contamination. The seller indemnified the Trust for
certain third party claims and government requirements related to
contamination at adjacent properties. During the fourth quarter of 1996, the
reserve was reduced to $200,000 with a corresponding reduction in the basis of
land at the shopping center. The Trust estimates that $200,000 is the cost to
monitor contaminant concentrations in groundwater for ten years, thereby
satisfying regulatory requirements, to the best of the Trust's knowledge.
A nonqualified deferred compensation plan for Trust officers was
established in 1994. The plan allows the officers to defer future income until
the earlier of age 65 or termination of employment with the Trust. As of
December 31, 1996, the Trust is liable to participants for approximately
$671,000 under this plan. Although this is an unfunded plan, the Trust has
purchased certain investments with which to match this obligation.
The Trust has entered into agreements with certain key employees whereby
if these employees voluntarily or involuntarily leave the employment of the
Trust within six months after a "change of control" (defined as control of 35%
or more of outstanding shares) of the Trust, they will be entitled to a lump
sum cash payment equal to one to three times their annual salary as of the
date of termination and have their health and welfare benefits and executive
privileges continued for a period of one to three years. In the event of a
change of control, the Trust also agreed that all restrictions on the exercise
or receipt of any stock options and stock grants shall lapse upon termination
of employment and that all shares owned at termination shall be redeemed by
the Trust at a formula price.
The Trust had previously entered into employment agreements with its
President and certain other key employees for terms of up to three years,
which automatically renewed at the end of each month unless either party
notified the other that it elected not to extend the term. During 1994 the
Trust offered certain of the employees covered under these agreements, other
than the President, a severance agreement in lieu of the employment agreement.
Two employees retained their employment agreements, which agreements now have
a fixed declining term. The severance agreement prescribes that, among other
things, if the employee is terminated without cause, he/she is entitled to
salary for up to 18 months and benefits for up to nine months.
As of December 31, 1996 in connection with the renovation of certain
shopping centers, the Trust has contractual obligations of $3.2 million. In
addition the Trust is contractually obligated under leases to provide up to
$10.1 million in building and tenant improvements.
F15
The Trust is obligated under ground lease agreements on several shopping
centers requiring minimum annual payments as follows:
(in thousands)
1997 $2,826
1998 2,826
1999 2,834
2000 2,839
2001 2,839
Thereafter 154,404
--------
$168,568
========
NOTE 6. 5 1/4% CONVERTIBLE SUBORDINATED DEBENTURES
---------------------------------------------------
In October 1993 the Trust issued $75.0 million of 5 1/4% convertible
subordinated debentures, realizing cash proceeds of approximately $73.0
million. The debentures were not registered under the Securities Act of 1933,
and were not publicly distributed within the United States. The debentures,
which mature in 2003, are convertible into shares of beneficial interest at
$36 per share. The debentures are redeemable by the Trust, in whole, at any
time after October 28, 1998 at 100% of the principal amount plus accrued
interest.
At December 1996 and 1995 the Trust had outstanding $289,000 of 5 1/4%
convertible subordinated debentures due 2002. The debentures which are
convertible into shares of beneficial interest at $30.625 were not registered
under the Securities Act of 1933 and were not publicly distributed within the
United States. In April 1994, $39.8 million of the debentures were redeemed at
a price equal to 120% of their principal amount or $47.8 million, in
accordance with a premium put. A principal amount of $53,000 of these
debentures was converted into 1,729 shares in 1994.
NOTE 7. SENIOR NOTES AND DEBENTURES
-----------------------------------
On August 16, 1996 the Trust issued $50.0 million of 7.48% Debentures due
August 15, 2026, netting approximately $49.8 million after adjusting for
underwriting discounts and other costs. The debentures, which were issued at a
price of 99.96%, pay interest semiannually on February 15, and August 15. The
debentures are redeemable at par at the option of the holders on August 15,
2008 and by the Trust at any time thereafter.
On January 19, 1995 the Trust issued $100.0 million of 8 7/8% Notes, due
January 15, 2000. The notes, which were issued at a price of 99.815%, pay
interest semi-annually on January 15 and July 15 and are not redeemable prior
to maturity. After deducting the underwriting discount and other costs, the
Trust netted approximately $98.9 million. In January 1995 the Trust executed a
five year interest rate swap on $25.0 million, whereby the Trust swapped fixed
interest payment obligations of 8.1% for a floating rate interest payment of
three month LIBOR. The floating rate during the first quarter of 1995 was
6.2%. In May 1995 the swap was terminated and the Trust sold the swap for $1.5
million, which is being amortized as a deduction to interest expense over the
remaining term.
F16
On April 21, 1995 the Trust issued $25.0 million of senior notes, netting
$24.9 million after deducting discounts and costs. The notes, which are due
April 21, 2002 and bear interest at 8%, payable semiannually on April 21 and
October 21, were issued at a price of 99.683%.
On December 8, 1995 the Trust issued an additional $40.0 million of
senior notes, netting $39.6 million after deducting costs. The notes, which
mature on December 1, 2005 and bear interest at 6 5/8%, payable June 1 and
December 1, were issued at a price of 99.3%.
NOTE 8. SHAREHOLDERS' EQUITY
----------------------------
On May 24, 1996 the Trust sold, to an institutional investor, 1.8 million
shares of beneficial interest ("shares") at $22 per share, netting $39.3
million. On December 13, 1996 the Trust sold another 1.6 million shares to the
public at $27 7/8 per share, netting $42.9 million.
In September 1995 the Trust issued 337,527 shares of beneficial interest
valued at $7.3 million in partial consideration for the purchase of Bristol
Shopping Center.
In April 1994 the Trust raised net proceeds of $61.3 million from a
public offering of 2.5 million shares of beneficial interest. In a concurrent
offering of 840,000 shares to an institutional investor, the Trust raised net
proceeds of $21.7 million.
The Trust has a Dividend Reinvestment Plan, whereby shareholders may use
their dividends to purchase shares. In 1996, 1995, and 1994, 181,274 shares,
193,965 shares, and 162,466 shares, respectively, were issued under the Plan.
On January 1, 1994 under the terms of the 1993 Long Term Incentive Plan,
an officer of the Trust purchased 40,000 common shares at $25 per share with
the assistance of a $1.0 million loan from the Trust. The loan, which has a
term of 12 years, bears interest at 6.24%. Forgiveness of up to 75% of the
loan is subject to the future performance of the Trust. One eighth of the loan
was forgiven on January 31, 1995; another one sixteenth was forgiven on each
of January 31, 1996 and 1997 as certain performance criteria of the Trust were
met.
In January 1991 the Trustees adopted the Federal Realty Investment Trust
Share Purchase Plan. Under the terms of this plan, officers and certain
employees of the Trust purchased 446,000 common shares at $15.125 per share
with the assistance of loans of $6.7 million from the Trust. Originally, the
Plan called for one sixteenth of the loan to be forgiven each year for eight
years, as long as the participant was still employed by the Trust. The loans
for all participants, but two, were modified in 1994 to extend the term an
additional four years and to tie forgiveness in 1995 and thereafter to certain
performance criteria of the Trust. One sixteenth of the loan was forgiven in
1995 and 1996. The Trust has loaned participants $1.1 million to pay the taxes
due in connection with the plan. The purchase
F17
loans and the tax loans bear interest at 9.39%. The shares purchased under the
plan may not be sold, pledged or assigned until both the purchase and tax
loans are satisfied and the term has expired.
In connection with a restricted share grant, the Trust accepted from its
President a noninterest bearing note for $210,000. One installment of $105,000
was paid on the note in 1992 and the second installment is due April 15, 2001.
This loan, tax loans issued in connection with 108,000 shares granted to
officers and key employees under the terms of the 1988 Share Bonus Plan, the
last $16,000 of which were forgiven in 1996, and the tax loans issued under
the Share Purchase Plan are recorded as notes receivable -officers.
At December 31, 1996, 1995 and 1994, respectively, the Trust had 62,386
shares, 61,328 shares and 60,200 shares in treasury at a cost of $1.2 million,
$1.2 million, and $1.1 million, respectively.
On April 13, 1989, the Trustees adopted a Shareholder Rights Plan (the
Plan). Under the Plan, one right was issued for each outstanding share of
common stock held as of April 24, 1989, and a right will be attached to each
share issued in the future. The rights are exercisable into common shares upon
the occurrence of certain events, including acquisition by a person or group
of certain levels of beneficial ownership or a tender offer by such a person
or group. The rights are redeemable by the Trust for $.01 and expire on April
24, 1999.
NOTE 9. STOCK OPTION PLAN
-------------------------
The 1993 Long Term Incentive Plan ("Plan") authorized the grant of
options and other stock based awards for up to 6.0 million shares. Options
granted under the plan have ten year terms and vest in one to three years.
Under the Plan, on each annual meeting date during the term of the plan, each
nonemployee Trustee will be awarded 2,500 options. Accordingly, on each of May
2, 1996, May 10, 1995 and May 4, 1994, 22,500, 20,000 and 20,000 options,
respectively, were awarded to nonemployee Trustees. In 1996, 81,181 options at
$21 to $21 5/8 per share were granted to employees of the Trust. On February
15, 1995, 719,000 stock options at $20.75 per share were granted to employees
of the Trust.
The option price to acquire shares under the 1993 Plan and previous plans
is required to be at least the fair market value at the date of grant. As a
result of the exercise of options, the Trust had outstanding from its officers
and employees notes for $2.2 million at December 31, 1996 and $1.9 million at
December 31, 1995. The notes issued under the 1993 plan bear interest at the
dividend rate on the date of exercise divided by the purchase price of such
shares. The notes issued under the previous plans bear interest at the lesser
of (i) the Trust's borrowing rate or (ii) the current indicated annual
dividend rate on the shares acquired pursuant to the option, divided by the
purchase price of such shares. The notes are collateralized by
F18
the shares and are with recourse. The loans have a term extending to the
employee's or officer's retirement date.
FAS Statement No. 123, "Accounting for Stock-Based Compensation" requires
pro forma information regarding net income and earnings per share as if the
Trust accounted for its stock options under the fair value method of that
Statement. The fair value for options issued in 1996 and 1995 has been
estimated as $120,000 and $1.4 million, respectively, as of the date of grant,
using a binomial model with the following weighted-average assumptions for
1996 and 1995, respectively: risk-free interest rates of 5.7% and 7.3%;
volatility factors of the expected market price of the Trust's shares of 19%
and 19%; and a weighted average expected life of the option of 5.6 years and
6.3 years.
Because option valuation models require the input of highly subjective
assumptions, such as the expected stock price volatility, and because changes
in these subjective input assumptions can materially affect the fair value
estimate, the existing model may not necessarily provide a reliable single
measure of the fair value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options are amortized to expense over the options' vesting period. The pro
forma information is as follows:
1996 1995
---- ----
(in thousands except for
earnings per share)
Pro forma net income $28,241 $22,692
Pro forma earnings per share $.84 $.71
A summary of the Trust's stock option activity for the years ended
December 31, is as follows:
Shares available Options Weighted-Average
for future Outstanding Option Price
option grants ----------- ------------
-------------
Beginning of the year 5,461,000 853,116 $24.23
Options granted (20,000) 20,000 24.875
Options exercised --- (47,240) 21.60
Options expired --- (1,750) 23.58
--------- ---------
December 31, 1994 5,441,000 824,126 24.875
Options granted (759,000) 759,000 20.784
Options exercised --- (20,744) 18.79
Options expired --- (47,750) 23.31
--------- ---------
December 31, 1995 4,682,000 1,514,632 22.71
Options granted (81,181) 81,181 21.21
Options exercised --- (126,918) 21.31
Options expired 33,666 (35,166) 22.47
--------- ---------
December 31, 1996 4,634,485 1,433,729 22.737
========= =========
At December 31, 1996 and 1995, options for 942,270 shares and 609,300
shares, respectively, were exercisable. The average remaining contractual life
of options outstanding at December 31, 1996 and 1995 was 7.1 years and 7.8
years, respectively. The weighted average grant date fair value per option for
options
F19
granted in 1996 and 1995 was $1.47 and $1.83, respectively. The exercise
price of options outstanding at December 31, 1996 ranged from $17.25 per share
to $26.00 per share.
NOTE 10. SAVINGS AND RETIREMENT PLAN
------------------------------------
The Trust has a savings and retirement plan in accordance with the
provisions of Section 401(k) of the Internal Revenue Code. Employees'
contributions range, at the discretion of each employee, from 1% to 17% of
compensation up to a maximum of $9,500. Under the plan, the Trust, out of its
current net income, contributes 50% of each employee's first 5% of
contributions. In addition, the Trust may make discretionary contributions
within the limits of deductibility set forth by the Code. Employees of the
Trust, who work over 1,000 hours annually, are eligible to become plan
participants. The Trust's expense for the years ended December 31, 1996, 1995
and 1994 was $179,000, $158,000 and $147,000, respectively. In 1996 and 1995
the Trust recorded a liability for an additional contribution of 1.5% and 1%
of salary, respectively, for all nonofficer employees who are eligible for the
401(k) plan. In addition, 1.5% of salary in 1996 and 1% of salary in 1995 was
accrued for all eligible nonofficer employees as a bonus.
NOTE 11. INTEREST EXPENSE
-------------------------
The Trust incurred interest expense totaling $46.4 million, $40.2 million
and $31.8 million, in 1996, 1995 and 1994, respectively, of which $871,000,
$975,000, and $348,000, respectively, was capitalized. Interest paid was $44.2
million in 1996, $33.4 million in 1995, and $39.9 million in 1994 which
included $8.0 million of the premium on the 5 1/4% convertible subordinated
debentures which were redeemed in April 1994.
NOTE 12. SUBSEQUENT EVENTS
--------------------------
On January 31, 1997, 22,000 restricted shares were granted to an officer
and two employees of the Trust. The shares vest over three years.
On January 6, 1997 as described in Footnote 1, the Trust purchased the
fee interest on three shopping centers and exercised an option to purchase the
fee on another shopping center. The Trust previously held these properties
under a capital lease. On January 22, 1997 the Trust purchased a retail
building in Chicago, Illinois for cash of $4.2 million.
On February 4, 1997 the Trust sold 3.0 million shares to an institutional
investor for $28 per share, netting $83.9 million.
F20
NOTE 13. QUARTERLY DATA (UNAUDITED)
-----------------------------------
The following summary represents the results of operations for each
quarter in 1996 and 1995:
(in thousands, except per share amounts)
Net Earnings
Revenue Income per share
------- ------ ---------
1996
----
March 31 $43,772 $6,026 $.19
June 30 43,570 6,897 .21
September 30 44,337 8,123 .24
December 31 47,376 7,696 .22
1995
----
March 31 $36,927 $6,623 $.21
June 30 36,989 5,203 (1) .16
September 30 38,973 5,918 .19
December 31 41,500 5,366 .16
(1) Income before loss on sale of real estate was $5.7 million or $.18 per
share.
F21
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
COLUMN A COLUMN B COLUMN C COLUMN D
- ---------------------------------------------------------------------------------------------------------------------
Initial cost to company
Cost Capitalized
Building and Subsequent to
Descriptions Encumbrance Land Improvements Acquisition
- ---------------------------------------------------------------------------------------------------------------------
ALLWOOD (New Jersey) $3,563,000 $ $3,920,000 $230,000
ANDORRA (Pennsylvania) 2,432,000 12,346,000 2,483,000
BALA CYNWYD (Pennsylvania) 3,565,000 14,466,000 1,782,000
BARRACKS ROAD (Virginia) 21,412,000 4,363,000 16,459,000 11,766,000
BETHESDA ROW (Maryland) 12,576,000 459,000 20,409,000 6,563,000
BLUESTAR (New Jersey) 27,194,000 29,922,000 1,751,000
BRAINERD VILLAGE (Tennessee) 1,920,000 8,006,000 3,227,000
BRICK PLAZA (New Jersey) 21,362,000 24,715,000 16,083,000
BRISTOL (Connecticut) 11,018,000 3,856,000 15,959,000 89,000
BRUNSWICK (New Jersey) 11,320,000 12,456,000 1,843,000
CALIFORNIA RETAIL BUILDINGS (10) 17,417,000 11,287,000 0
CLIFTON (New Jersey) 3,314,000 3,646,000 303,000
CONGRESSIONAL PLAZA (Maryland) 2,793,000 7,424,000 33,596,000
CONNECTICUT RETAIL BUILDINGS (13) 25,061,000 27,739,000 1,633,000
CROSSROADS (Illinois) 4,635,000 11,611,000 812,000
DEDHAM PLAZA (Massachusetts) 12,369,000 12,918,000 739,000
EASTGATE (North Carolina) 1,608,000 5,775,000 4,426,000
ESCONDIDO PROMENADE (California) 9,400,000 11,505,000 12,147,000 0
ELLISBURG CIRCLE (New Jersey) 4,028,000 11,309,000 9,720,000
FALLS PLAZA (Virginia) 4,257,000 530,000 735,000 1,388,000
FEASTERVILLE (Pennsylvania) 723,000 1,600,000 2,678,000
FEDERAL PLAZA (Maryland) 28,445,000 10,216,000 17,895,000 31,229,000
FINLEY SQUARE (Illinois) 9,252,000 9,544,000 1,584,000
FLORIDA RETAIL BUILDINGS (2) 5,206,000 1,631,000 0
FLOURTOWN (Pennsylvania) 1,345,000 3,943,000 1,879,000
FOREST CITY (Michigan) 525,000 1,601,000 2,442,000
GAITHERSBURG SQUARE (Maryland) 7,701,000 5,271,000 8,336,000
GARDEN MARKET (Illinois) 2,677,000 4,829,000 421,000
GOVERNOR PLAZA (Maryland) 2,068,000 4,905,000 9,991,000
HAMILTON (New Jersey) 4,912,000 5,405,000 1,858,000
HUNTINGTON (New York) 14,548,000 16,008,000 4,270,000
IDYLWOOD PLAZA (Virginia) 4,308,000 10,026,000 435,000
ILLINOIS RETAIL BUILDINGS (2) 1,291,000 2,325,000 89,000
LANCASTER (Pennsylvania) 1,094,000 2,103,000 2,611,000
LANGHORNE SQUARE (Pennsylvania) 720,000 2,974,000 8,311,000
LAUREL (Maryland) 7,458,000 22,525,000 12,808,000
LAWRENCE PARK (Pennsylvania) 3,704,000 7,160,000 5,907,000
LOEHMANN'S PLAZA (Virginia) 6,415,000 1,237,000 15,096,000 5,069,000
MASSACHUSETTS RETAIL BLDG (1) 1,873,000 1,884,000 76,000
MID PIKE PLAZA (Maryland) 10,041,000 10,335,000 5,494,000
NEW JERSEY RETAIL BUILDING (1) 737,000 1,466,000 1,066,000
NORTHEAST (Pennsylvania) 1,500,000 1,152,000 10,596,000 8,627,000
NORTHEAST PLAZA (Georgia) 6,930,000 26,236,000 5,083,000
NORTH LAKE COMMONS (Illinois) 2,529,000 8,604,000 315,000
OLD KEENE MILL (Virginia) 6,979,000 638,000 998,000 2,680,000
PAN AM SHOPPING CENTER (Virginia) 8,694,000 12,929,000 2,423,000
PARK & SHOP (District of Columbia) 4,840,000 6,319,000 163,000
PERRING PLAZA (Maryland) 2,800,000 6,461,000 14,268,000
QUEEN ANNE PLAZA (Massachusetts) 3,319,000 8,457,000 2,099,000
QUINCE ORCHARD PLAZA (Maryland) 3,197,000 7,949,000 5,015,000
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H
- -----------------------------------------------------------------------------------------------------------------------------------
Gross amount at which
carried at close of period Accumulated Date
Building and Depreciation and of Date
Descriptions Land Improvements Total Amortization Construction Acquired
- -----------------------------------------------------------------------------------------------------------------------------------
ALLWOOD (New Jersey) $ $4,150,000 $4,150,000 $972,000 1958 12/12/88
ANDORRA (Pennsylvania) 2,432,000 14,829,000 17,261,000 3,720,000 1953 01/12/88
BALA CYNWYD (Pennsylvania) 3,565,000 16,248,000 19,813,000 1,608,000 1955 09/22/93
BARRACKS ROAD (Virginia) 4,363,000 28,225,000 32,588,000 10,669,000 1958 12/31/85
BETHESDA ROW (Maryland) 459,000 26,972,000 27,431,000 1,835,000 1945-1991 12/31/93
BLUESTAR (New Jersey) 31,673,000 31,673,000 7,305,000 1959 12/12/88
BRAINERD VILLAGE (Tennessee) 1,920,000 11,233,000 13,153,000 3,413,000 1960 12/31/87
BRICK PLAZA (New Jersey) 40,798,000 40,798,000 6,729,000 1958 12/28/89
BRISTOL (Connecticut) 3,856,000 16,048,000 19,904,000 569,000 1959 9/22/95
BRUNSWICK (New Jersey) 14,299,000 14,299,000 3,331,000 1957 12/12/88
CALIFORNIA RETAIL BUILDINGS (10) 17,417,000 11,287,000 28,704,000 1888-1995 12/31/96
CLIFTON (New Jersey) 3,949,000 3,949,000 872,000 1959 12/12/88
CONGRESSIONAL PLAZA (Maryland) 2,793,000 41,020,000 43,813,000 9,806,000 1965 04/01/65
CONNECTICUT RETAIL BUILDINGS (13) 25,061,000 29,372,000 54,433,000 979,000 1900-1991 1994-1996
CROSSROADS (Illinois) 4,635,000 12,423,000 17,058,000 1,262,000 1959 07/19/93
DEDHAM PLAZA (Massachusetts) 12,369,000 13,657,000 26,026,000 1,208,000 1959 12/31/93
EASTGATE (North Carolina) 1,608,000 10,201,000 11,809,000 3,910,000 1963 12/18/86
ESCONDIDO PROMENADE (California) 11,505,000 12,147,000 23,652,000 1987 12/31/96
ELLISBURG CIRCLE (New Jersey) 4,028,000 21,029,000 25,057,000 3,365,000 1959 10/16/92
FALLS PLAZA (Virginia) 530,000 2,123,000 2,653,000 1,579,000 1962 09/30/67
FEASTERVILLE (Pennsylvania) 4,278,000 4,278,000 2,885,000 1958 07/23/80
FEDERAL PLAZA (Maryland) 10,216,000 49,124,000 59,340,000 9,038,000 1970 06/29/89
FINLEY SQUARE (Illinois) 9,252,000 11,128,000 20,380,000 592,000 1974 04/27/95
FLORIDA RETAIL BUILDINGS (2) 5,206,000 1,631,000 6,837,000 34,000 1920 02/28/96
FLOURTOWN (Pennsylvania) 1,345,000 5,822,000 7,167,000 1,560,000 1957 04/25/80
FOREST CITY (Michigan) 525,000 4,043,000 4,568,000 1,694,000 1964 03/29/73
GAITHERSBURG SQUARE (Maryland) 6,012,000 15,296,000 21,308,000 1,344,000 1966 04/22/93
GARDEN MARKET (Illinois) 2,677,000 5,250,000 7,927,000 360,000 1958 07/28/94
GOVERNOR PLAZA (Maryland) 2,068,000 14,896,000 16,964,000 5,916,000 1963 10/01/85
HAMILTON (New Jersey) 7,263,000 7,263,000 2,009,000 1961 12/12/88
HUNTINGTON (New York) 20,278,000 20,278,000 4,590,000 1962 12/12/88
IDYLWOOD PLAZA (Virginia) 4,308,000 10,461,000 14,769,000 804,000 1991 04/15/94
ILLINOIS RETAIL BUILDINGS (2) 1,291,000 2,414,000 3,705,000 73,000 1900-1927 1995
LANCASTER (Pennsylvania) 4,714,000 4,714,000 2,929,000 1958 04/24/80
LANGHORNE SQUARE (Pennsylvania) 720,000 11,285,000 12,005,000 3,729,000 1966 01/31/85
LAUREL (Maryland) 7,458,000 35,333,000 42,791,000 10,507,000 1956 08/15/86
LAWRENCE PARK (Pennsylvania) 13,067,000 13,067,000 9,016,000 1972 07/23/80
LOEHMANN'S PLAZA (Virginia) 1,248,000 20,154,000 21,402,000 8,291,000 1971 07/21/83
MASSACHUSETTS RETAIL BLDG (1) 1,873,000 1,960,000 3,833,000 74,000 1930 09/07/95
MID PIKE PLAZA (Maryland) 15,829,000 15,829,000 6,336,000 1963 05/18/82
NEW JERSEY RETAIL BUILDING (1) 737,000 2,532,000 3,269,000 9,000 1940 08/16/95
NORTHEAST (Pennsylvania) 1,152,000 19,223,000 20,375,000 6,075,000 1959 08/30/83
NORTHEAST PLAZA (Georgia) 6,933,000 31,316,000 38,249,000 10,483,000 1952 12/31/86
NORTH LAKE COMMONS (Illinois) 2,529,000 8,919,000 11,448,000 689,000 1989 04/27/94
OLD KEENE MILL (Virginia) 638,000 3,678,000 4,316,000 1,971,000 1968 06/15/76
PAN AM SHOPPING CENTER (Virginia) 8,694,000 15,352,000 24,046,000 2,297,000 1979 02/05/93
PARK & SHOP (District of Columbia) 4,840,000 6,482,000 11,322,000 182,000 1930 12/01/95
PERRING PLAZA (Maryland) 2,800,000 20,729,000 23,529,000 5,876,000 1963 10/01/85
QUEEN ANNE PLAZA (Massachusetts) 3,319,000 10,556,000 13,875,000 845,000 1967 12/23/94
QUINCE ORCHARD PLAZA (Maryland) 2,928,000 13,233,000 16,161,000 1,607,000 1975 04/22/93
COLUMN A COLUMN I
- ------------------------------------------------------------------
Life on which
depreciation in latest
income statements
Descriptions is computed
- ------------------------------------------------------------------
ALLWOOD (New Jersey) 35 years
ANDORRA (Pennsylvania) 35 years
BALA CYNWYD (Pennsylvania) 35 years
BARRACKS ROAD (Virginia) 35 years
BETHESDA ROW (Maryland) 35 years
BLUESTAR (New Jersey) 35 years
BRAINERD VILLAGE (Tennessee) 35 years
BRICK PLAZA (New Jersey) 35 years
BRISTOL (Connecticut) 35 years
BRUNSWICK (New Jersey) 35 years
CALIFORNIA RETAIL BUILDINGS (10) 35 years
CLIFTON (New Jersey) 35 years
CONGRESSIONAL PLAZA (Maryland) 20 years
CONNECTICUT RETAIL BUILDINGS (13) 35 years
CROSSROADS (Illinois) 35 years
DEDHAM PLAZA (Massachusetts) 35 years
EASTGATE (North Carolina) 35 years
ESCONDIDO PROMENADE (California) 35 years
ELLISBURG CIRCLE (New Jersey) 35 years
FALLS PLAZA (Virginia) 22 3/4 years
FEASTERVILLE (Pennsylvania) 20 years
FEDERAL PLAZA (Maryland) 35 years
FINLEY SQUARE (Illinois) 35 years
FLORIDA RETAIL BUILDINGS (2) 35 years
FLOURTOWN (Pennsylvania) 35 years
FOREST CITY (Michigan) 25 3/4 years
GAITHERSBURG SQUARE (Maryland) 35 years
GARDEN MARKET (Illinois) 35 years
GOVERNOR PLAZA (Maryland) 35 years
HAMILTON (New Jersey) 35 years
HUNTINGTON (New York) 35 years
IDYLWOOD PLAZA (Virginia) 35 years
ILLINOIS RETAIL BUILDINGS (2) 35 years
LANCASTER (Pennsylvania) 22 years
LANGHORNE SQUARE (Pennsylvania) 35 years
LAUREL (Maryland) 35 years
LAWRENCE PARK (Pennsylvania) 22 years
LOEHMANN'S PLAZA (Virginia) 35 years
MASSACHUSETTS RETAIL BLDG (1) 35 years
MID PIKE PLAZA (Maryland) 35 years
NEW JERSEY RETAIL BUILDING (1) 35 years
NORTHEAST (Pennsylvania) 35 years
NORTHEAST PLAZA (Georgia) 35 years
NORTH LAKE COMMONS (Illinois) 35 years
OLD KEENE MILL (Virginia) 33 1/3 years
PAN AM SHOPPING CENTER (Virginia) 35 years
PARK & SHOP (District of Columbia) 35 years
PERRING PLAZA (Maryland) 35 years
QUEEN ANNE PLAZA (Massachusetts) 35 years
QUINCE ORCHARD PLAZA (Maryland) 35 years
F-22
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
COLUMN A COLUMN B COLUMN C COLUMN D
- -----------------------------------------------------------------------------------------------------------------------
Initial cost to company
Cost Capitalized
Building and Subsequent to
Descriptions Encumbrance Land Improvements Acquisition
- -----------------------------------------------------------------------------------------------------------------------
ROLLINGWOOD APTS. (Maryland) 552,000 2,246,000 3,629,000
RUTGERS (New Jersey) 13,113,000 14,429,000 613,000
SAUGUS (Massachusetts) 4,383,000 8,291,000 0
SHILLINGTON (Pennsylvania) 616,000 1,387,000 1,668,000
SHIRLINGTON (Virginia) 8,761,000 14,808,000 1,827,000
TOWN & COUNTRY (Illinois) 904,000 2,483,000 4,896,000
TROY (New Jersey) 2,533,000 5,193,000 6,257,000
TYSONS STATION (Virginia) 4,265,000 388,000 453,000 2,437,000
WESTFALLS (Virginia) 4,885,000 538,000 535,000 2,066,000
WILDWOOD (Maryland) 9,111,000 1,061,000 5,268,000
WILLIAMSBURG (Virginia) 2,758,000 7,160,000 2,922,000
WILLOW GROVE (Pennsylvania) 1,600,000 6,643,000 17,063,000
WILLOW LAWN (Virginia) 3,192,000 7,723,000 39,558,000
WYNNEWOOD (Pennsylvania) 8,055,000 13,759,000 9,000
- -----------------------------------------------------------------------------------------------------------------------
TOTALS $229,189,000 $227,496,000 $586,495,000 $333,874,000
=========== =========== =========== ===========
COLUMN A COLUMN E COLUMN F COLUMN G
- -----------------------------------------------------------------------------------------------------------------------------
Gross amount at which carried at
close of period Accumulated Date
Building and Depreciation and of
Descriptions Land Improvements Total Amortization Construction
- -----------------------------------------------------------------------------------------------------------------------------
ROLLINGWOOD APTS. (Maryland) 572,000 5,855,000 6,427,000 4,571,000 1960
RUTGERS (New Jersey) 15,042,000 15,042,000 3,390,000 1973
SAUGUS (Massachusetts) 4,383,000 8,291,000 12,674,000 1976
SHILLINGTON (Pennsylvania) 3,055,000 3,055,000 1,938,000 1956
SHIRLINGTON (Virginia) 8,761,000 16,635,000 25,396,000 434,000 1940
TOWN & COUNTRY (Illinois) 904,000 7,379,000 8,283,000 6,109,000 1968
TROY (New Jersey) 11,450,000 11,450,000 6,162,000 1966
TYSONS STATION (Virginia) 475,000 2,803,000 3,278,000 2,447,000 1954
WESTFALLS (Virginia) 559,000 2,580,000 3,139,000 1,976,000 1960
WILDWOOD (Maryland) 9,111,000 6,329,000 15,440,000 4,840,000 1958
WILLIAMSBURG (Virginia) 2,758,000 10,082,000 12,840,000 3,427,000 1961
WILLOW GROVE (Pennsylvania) 1,600,000 23,706,000 25,306,000 7,558,000 1953
WILLOW LAWN (Virginia) 3,192,000 47,281,000 50,473,000 15,690,000 1957
WYNNEWOOD (Pennsylvania) 8,055,000 13,768,000 21,823,000 64,000 1948
- -------------------------------------------------------------------------------------------------------------
TOTALS $225,680,000 $922,185,000 $1,147,865,000 $223,553,000
=========== =========== ============= ===========
COLUMN A COLUMN H COLUMN I
- -----------------------------------------------------------------------------------------
Life on which
depreciation in latest
Date income statements
Descriptions Acquired is computed
- -----------------------------------------------------------------------------------------
ROLLINGWOOD APTS. (Maryland) 01/15/71 25 years
RUTGERS (New Jersey) 12/12/88 35 years
SAUGUS (Massachusetts) 10/01/96 35 years
SHILLINGTON (Pennsylvania) 07/23/80 20 years
SHIRLINGTON (Virginia) 12/21/95 35 years
TOWN & COUNTRY (Illinois) 10/15/73 25 years
TROY (New Jersey) 07/23/80 22 years
TYSONS STATION (Virginia) 01/17/78 17 years
WESTFALLS (Virginia) 10/05/72 25 years
WILDWOOD (Maryland) 05/05/69 33 1/3 years
WILLIAMSBURG (Virginia) 04/30/86 35 years
WILLOW GROVE (Pennsylvania) 11/20/84 35 years
WILLOW LAWN (Virginia) 12/05/83 35 years
WYNNEWOOD (Pennsylvania) 10/29/96 35 years
- --------------------------------------
TOTALS
F-23
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
Three Years Ended December 31, 1996
Reconciliation of Total Cost
--------------------------------------
Balance, January 1, 1994 $758,088,000
Additions during period
Acquisitions 49,438,000
Improvements 46,916,000
Deduction during period - miscellaneous retirements (1,720,000)
-----------
Balance, December 31, 1994 852,722,000
Additions during period
Acquisitions 123,722,000
Improvements 38,001,000
Deduction during period - disposition
of property and miscellaneous retirements (4,763,000)
-----------
Balance, December 31, 1995 1,009,682,000
Additions during period
Acquisitions 105,616,000
Improvements 42,257,000
Deduction during period - disposition
of property and miscellaneous retirements (9,690,000)
-----------
Balance, December 31, 1996 $1,147,865,000
---------------
(A) For Federal tax purposes, the aggregate cost basis is approximately
$1,032,519,000 as of December 31, 1996.
F- 24
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE III
SUMMARY OF REAL ESTATE AND ACCUMULATED
DEPRECIATION - CONTINUED
Three Years Ended December 31, 1996
Reconciliation of Accumulated Depreciation and Amortization
---------------------------------------------------------------------
Balance, January 1, 1994 $135,045,000
Additions during period
Depreciation and amortization expense 26,681,000
Deductions during period - miscellaneous
retirements (1,090,000)
-----------------
Balance, December 31, 1994 160,636,000
Additions during period
Depreciation and amortization expense 31,550,000
Deductions during period - disposition of
property and miscellaneous retirements (1,391,000)
-----------------
Balance, December 31, 1995 190,795,000
Additions during period
Depreciation and amortization expense 34,803,000
Deductions during period - disposition of
property and miscellaneous retirements (2,045,000)
-----------
Balance, December 31, 1996 $223,553,000
=================
F- 25
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
Year Ended December 31, 1996
Column A Column B Column C Column D
- ----------------------- ----------------- ------------------ --------------------
Periodic Payment
Description of Lien Interest Rate Maturity Date Terms
- ----------------------- ----------------- ------------------ --------------------
Leasehold mortgage 10% December 2003 Interest only
on shopping monthly; $10,000,000
center in New Jersey balloon payment
December 2003
Mortgage on 10% January 1998 Interest only
shopping center monthly; balloon
in New Jersey payment January 1998
Mortgage on retail Greater of prime plus November 1997 Interest only
buildings in Philadelphia 2% or 10% monthly; balloon
payment November 1997
Mortgage on retail
buildings in Philadelphia 5% November 1997 Interest only monthly;
balloon payment due
November 1997
Mortgage on retail 10% plus participation May 2021 Interest only; balloon
buildings in Philadelphia due at maturity
Mortgage on land in 9% until March 31, 1997 Earlier of exercise of Interest only; balloon
Bethesda, Maryland 9.5% thereafter purchase option on land due at maturity
or March 31, 1998
Column A Column E Column F Column G
- ----------------------- --------------- --------------- ---------------
Carrying
Face Amount Amount of
Description of Lien Prior Liens of Mortgages Mortgages (1)
- ----------------------- --------------- --------------- ---------------
Leasehold mortgage --- 10,000,000 10,000,000 (2)
on shopping
center in New Jersey
Mortgage on --- 4,020,000 3,208,000 (3)
shopping center
in New Jersey
Mortgage on retail 900,000 892,000 (4)
buildings in Philadelphia
Mortgage on retail
buildings in Philadelphia 950,000 938,000 (5)
Mortgage on retail 9,250,000 9,250,000
buildings in Philadelphia
Mortgage on land in 3,625,000 3,625,000
Bethesda, Maryland
--------------- --------------- ---------------
--- $28,745,000 $27,913,000
=============== =============== ===============
1) For Federal tax purposes, the aggregate tax basis is approximately
$27,913,000 as of December 31, 1996. No payments are delinquent on these
mortgages.
2) This mortgage is extendable for up to 45 years with interest increasing to a
maximum of 11%.
3) This mortgage is available for up to $4,020,000. At December 31, 1995,
$3,182,000 was outstanding.
4) This mortgage is available for up to $900,000. At December 31, 1995,
$379,000 was outstanding.
5) This mortgage is available for up to $950,000.
F-26
FEDERAL REALTY INVESTMENT TRUST
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE - CONTINUED
Three Years Ended December 31, 1996
Reconciliation of Carrying Amount
-------------------------------------------
Balance, January 1, 1994 $13,871,000
Additions during period
Increase in existing loan 7,000
Deductions during period
Wrap portion of wrap mortgage
written off as uncollectible (700,000)
--------------
Balance, December 31, 1994 13,178,000
Additions during period
Increase in existing loan 4,000
Issuance of loan 379,000
-------
Balance, December 31, 1995 13,561,000
Additions during period
Increase in existing loan 25,000
Issuance of loans 14,327,000
----------
Balance, December 31, 1996 $27,913,000
==============
F- 27
Report of Independent Certified Public Accountants
--------------------------------------------------
on Supplemental Information
---------------------------
Trustees and Shareholders
Federal Realty Investment Trust
In connection with our audit of the consolidated financial statements of
Federal Realty Investment Trust referred to in our report dated February 5,
1997 which is included in this Form 10-K, we have also audited Schedules III
and IV as of December 31, 1996 and for each of the three years then ended. In
our opinion, these schedules present fairly, in all material respects, the
information required to be set forth therein.
Grant Thornton LLP
Washington, D.C.
February 5, 1997
F28
NON-EXCLUSIVE BROKERAGE AGREEMENT
---------------------------------
This Agreement is made and entered into on this third day of December, 1996 by
and between Federal Realty Investment Trust, an unincorporated business trust
organized under the business laws of the District of Columbia and Street Retail,
Inc., a Maryland corporation (collectively, "Client"), and Westport Realty
Advisors, Inc. and Jack Alan Guttman (collectively, "Broker").
In consideration of the mutual covenants set forth in this Agreement, the
parties agree as follows:
1. This Agreement replaces the Exclusive Brokerage Agreement by and between
Client and Broker dated August 20, 1995 ("Prior Agreement") in its entirety. As
of August 21, 1996, the Prior Agreement is terminated and its terms and
provisions, including Section 6, but excluding Section 7, thereof, are null and
void.
2. Client hereby appoints Broker as its non-exclusive real estate broker for
the purchase of urban retail buildings and traditional "strip" shopping centers
and shopping malls (collectively, "Properties") located in Massachusetts,
Connecticut, New York and New Jersey (collectively, "Broker Area"). Broker
shall perform the duties of a real estate broker; specifically, Broker shall
conduct searches for Properties which fit the criteria established by Client and
assist Client with all aspects of the due diligence process in order to enable
Client to evaluate the desirability and feasibility of acquiring such Properties
or any interest therein; such assistance shall include collecting and providing
Client with market information such as demographics, information on competing
Properties, comparable rentals and sales and assistance in the appraisal and
underwriting of the Properties. Client shall have a right of first refusal,
which refusal must be in writing, on all Properties identified or located by
Broker in Broker's Area before Broker can identify, offer or show such
Properties to any other potential purchaser. Client must respond to Broker
indicating interest in pursuing or not pursuing such Properties within 14 days
of receipt of Broker's identification of such Properties. Client's indication
of interest in such Properties shall not bind Client in any way to purchase such
Properties, and no Commission (as that term is defined herein) shall be paid to
Broker unless the conditions precedent to the payment of a Commission set forth
in Section 6 hereof have been met. Client shall notify Broker if it later
determines not to continue investigating the possibility of a purchase of any
such Properties. Following such notification of refusal, Broker may identify,
offer or show any such Properties to any other potential purchaser.
3. Broker represents and warrants that:
a) Broker will act in accordance with the highest professional standards
of the industry and in compliance with all applicable laws,
regulations, codes, ordinances and orders.
F29
Non-Exclusive Brokerage Agreement
b) There are no obligations, commitments, or impediments of any kind that
will limit or prevent the Broker's performance of its services and
obligations pursuant to this Agreement.
c) The Broker is duly licensed as a real estate broker in the States of
Massachusetts, Connecticut, New York and New Jersey.
d) Broker will perform its services in a professional manner and in the
most expeditious and economical manner consistent with the interest of
Client.
e) Broker is an independent contractor and not an employee of Client.
f) Broker solely represents Client in any transaction pursuant to this
Agreement and must disclose Broker's sole representation of Client to
all third parties contacted in connection with this Agreement.
g) Broker shall NOT disclose to any prospective seller or anyone else
information obtained within the confidentiality and trust of the
fiduciary relationship with Client, nor disclose to the prospective
seller or anyone else information similarly obtained from Client
without the consent of Client.
h) Broker shall NOT receive any fees, commissions or other remuneration
other than the Commission (as hereinafter defined) from any seller,
broker or any other source in connection with any property purchased
by Client pursuant to this Agreement
4. Broker's authority is limited to performing the services in accordance with
the terms of this Agreement. Broker does not have any authority to enter into
or execute any agreement for or on behalf of Client. No written proposals,
offers or other information concerning Client shall be distributed without
Client's prior written consent, which may be withheld in Client's sole and
absolute discretion. Client shall have the right to specify Broker's degree of
involvement, if any, with respect to any negotiation of any contract of sale
("Contract of Sale"). Broker acknowledges that entering into a Contract of Sale
involves negotiation of complex provisions and issues, including business, tax
and operational issues and liabilities relating to a property, and that Client,
therefore, expressly reserves the right to reject any and all proposals for a
Contract of Sale and to approve any and all terms and conditions of any proposed
Contract of Sale as Client sees fit, in Client's sole and absolute discretion.
5. The term of this Agreement ("Term") shall commence on August 21, 1996 and
end at midnight on August 21, 1997, unless sooner terminated in accordance with
the provisions of this
F30
Non-Exclusive Brokerage Agreement
Agreement.
6. For transactions less than $10,000,001, Client shall pay Broker a
commission (the "Commission") equal to:
(i) 2.25% of the portion of the aggregate gross sales price ("Purchase
Price") of the Properties acquired subject to this Agreement up to
$2,000,000;
(ii) 1.75% of the portion of the Purchase Price exceeding $2,000,000 up
to $5,000,000;
(iii) 1.50% of the portion of the Purchase Price exceeding $5,000,000 up
to $10,000,000.
For transactions exceeding $10,000,000, Client shall pay Broker a
commission (The "Commission") equal to:
(i) 1.25% of the portion of the Purchase Price up to $15,000,000;
(ii) 1.00% of the portion of the Purchase Price exceeding $15,000,000 up
to $20,000,000;
(iii) .75% of the portion of the Purchase Price exceeding $20,000,000 up
to $30,000,000;
(iv) .50% of the portion of the Purchase Price exceeding $30,000,000 up
to $75,000,000;
(v) .25% of the portion of the Purchase Price exceeding $75,000,000.
Notwithstanding anything to the contrary contained in this Agreement, the
following shall be conditions precedent to Client's obligation to pay the
Commission:
a) The execution and delivery by Client and seller of a Contract of
Sale for one or more Properties acceptable in form and substance to
Client, in Client's sole and absolute discretion; and
b) The actual closing of the sale, including Client's payment of all
monies due at closing, and transfer of title, or other evidence of
ownership, to Client.
F31
Non-Exclusive Brokerage Agreement
Failure of either of these conditions shall preclude any claim for a Commission
by Broker. In no event shall Broker ever receive any fees, commissions, or
other remuneration from any seller, broker or other person or entity in
connection with properties purchased by Client pursuant to this Agreement.
Except following the occurrence of an Event of Default as described in Section
9, it is further understood that the Commission shall be paid to Broker if, (i)
within One Hundred Eighty (180) days after the expiration or termination of the
Term, Client enters into a Contract of Sale for one or more Properties presented
by Broker during the Term and named in a written list ("List") delivered to
Client by Broker within ten (10) days following the expiration of the Term or
the date of termination of this Agreement ("Period End"), provided that, no more
than five (5) Properties are included on the List, Broker is actively engaged in
negotiating the purchase by Client of each Property included on the List, all
Properties included on the List shall be agreed to by Client (which agreement
shall not be unreasonably withheld) and the owner of each Property included on
the List shall provide a letter to Client by the Period End indicating active
interest in selling such Property to Client, (ii) such purchase is ultimately
consummated, and (iii) the two conditions precedent to Client's obligation to
pay the Commission, as set forth above, have been met. Broker's Commission
shall be the sole compensation paid to Broker and Broker shall not be entitled
to reimbursement for any expenses or any other sums Broker incurs related to or
involving the performance of the services. The Commission shall be paid to
Broker at closing and Client hereby authorizes the attorney or title company
conducting the closing to disburse the Commission to Broker at such closing.
The Commission shall be payable if the transfer or sale is structured as a cash
sale, like-kind exchange, partial sale, joint venture, newly formed partnership
or transfer of stock.
7. In no event shall Client be responsible to pay any persons or entities,
other than Broker, any commissions or other remuneration of any kind in
connection with this Agreement or by virtue of their association with Broker.
Further, Client shall not be obligated to see to the application of the
Commission, if any, due under this Agreement or the payment of any other
remuneration for the benefit of any persons or entities other than Broker and no
other persons or entity shall be a third party beneficiary of this Agreement.
Broker shall be solely responsible for the direct payment of any commissions or
other remuneration of any kind due to other persons or entities claiming
entitlement to a share of the Commission or any other remuneration under this
Agreement or by virtue of their association with Broker. Broker hereby agrees
to indemnify and hold Client harmless from and against any and all claims,
demands, obligations, liabilities, losses and damages (including, without
limitation, attorney's fees of counsel selected by Client) arising directly or
indirectly out of or in connection with any claim for commissions or other
remuneration of any kind for any person or entity claiming by, through or under
Broker or relating in any way to this Agreement, or Broker's actions or failure
to act pursuant to this Agreement; it being understood and agreed that Client's
liability hereunder shall be limited to
F32
Non-Exclusive Brokerage Agreement
the payment to Broker of the Commission, if any, owed under the Agreement. In
the event any claims, demands, obligations, liabilities, losses and/or damages
arise in connection with any claim for commissions, fees or other remuneration,
Client may, in its sole and absolute discretion, withhold Commissions otherwise
payable to Broker pending final resolution and may offset against such
Commissions any such claims, demands obligations, liabilities, losses and or
damages. This provision shall survive any termination of this Agreement.
8. Broker shall obtain, pay for and keep in force at all times during the
performance of work pursuant to this Agreement, the following insurance coverage
placed with insurance companies having an A.M. Best rating of A VI or better:
Comprehensive General Liability Insurance, with limit of not less than one
million dollars ($1,000,000) per occurrence, or Commercial General Liability
--
Insurance with limits of not less than one million dollars ($1,000,000) per
occurrence and two million dollars ($2,000,000) aggregate. Client shall be
added as an additional insured. The policy shall provide such additional
insured with a thirty (30) day notice of cancellation, non-renewal or material
change. Any certificates of insurance furnished in accordance with this
Agreement shall specify who has been added as an additional insured and shall
state that the policy has been amended to provide the thirty (30) day advance
notice.
Professional Liability Insurance with a limit of not less than one million
dollars ($1,000,000). Contractor may meet the limits of liability indicated by
means of the use of an umbrella liability policy. Any general liability policy
must be written on an occurrence basis. Owner shall be furnished with
certificates evidencing that all such insurance specified herein is in force
prior to commencement of services provided pursuant to this Agreement.
9. This Agreement may be terminated by either party upon thirty (30) days'
written notice. In the event of termination by either party, Broker shall be
entitled to receive only that Commission which it has earned pursuant to and in
accordance with Section 6 of this Agreement and Client shall have no further
obligations or liabilities hereunder.
10. Broker's failure or refusal to perform or observe any obligation, covenant,
or condition of this Agreement shall constitute an Event of Default. Should an
Event of Default occur, Client may, at its option, terminate this Agreement
without affecting any other remedy which it may have at law or in equity. Such
termination shall be effective immediately upon Broker's receipt of written
notice from Client. In such event, Broker shall be entitled to receive only
that Commission which it has already earned pursuant to and in accordance with
Section 6 of this Agreement, less any and all damages, losses, claims, costs and
expenses incurred or suffered by Client as a result of Broker's failure or
refusal to perform and Client shall have no further
F33
Non-Exclusive Brokerage Agreement
obligations or liabilities hereunder. Broker will not be entitled to receive
any Commissions on properties that are purchased by Client, unless the purchase
agreement is fully executed before the date of occurrence of an Event of Default
and the conditions precedent to the Client's obligation to pay a Commission set
forth in Section 6 have been met.
11. Client, its directors, employees, officers, agents and shareholders shall
not be personally liable under this Agreement and Broker hereby agrees to look
solely to Client's property, real, personal or otherwise, tangible or
intangible, for payment of any claim hereunder. A similar limitation on
liability shall be inserted in each document executed by Client (if any)
pursuant to this Agreement.
12. Whenever any demand, request, approval consent or notice ("Notice") shall
or may be given by one party to the other, Notice shall be addressed to the
parties at their respective addresses as set forth below and delivered by (i)
hand, (ii) facsimile, (iii) a nationally recognized overnight express courier,
or (iv) registered or certified mail return receipt requested. The date of
actual receipt shall be deemed the date of service of Notice. In the event an
addressee refuses to accept delivery, however, then Notice shall be deemed to
have been served on either (i) the date hand delivery is refused, (ii) the next
business day in the case of delivery by overnight courier, or (iii) three (3)
business days after mailing the notice in the case of registered or certified
mail. Either party may, at any time, change its Notice address by giving the
other party Notice, in accordance with the above, stating the change and setting
forth the new address.
Client: Ron D. Kaplan
Vice President, Capital Markets
Federal Realty Investment Trust
1626 East Jefferson Street
Rockville, Maryland 20852-4041
and
Robert S. Wennett
Senior Vice President, Acquisitions
Federal Realty Investment Trust
1626 East Jefferson Street
Rockville, Maryland 20852-4041
with a copy to:
F34
Non-Exclusive Brokerage Agreement
Street Retail, Inc.
1626 East Jefferson Street
Rockville, Maryland 20852-4041
Attn: Secretary
Broker: Westport Realty Advisors, Inc.
35 Prospect Road
Westport, Connecticut 06880
Attn: Jack Alan Guttman, President
13. This Agreement contains the entire agreement between Client and Broker,
supersedes any prior agreements or understandings, and no oral statements or
prior written matter not specifically incorporated in this Agreement shall be of
any force and effect. No variation, modification, or changes of this Agreement
shall be binding on either party to the Agreement unless set forth in a document
executed by these parties or a duly authorized agent, officer, or representative
hereof.
14. Neither Client nor Broker shall file or record any instrument or document
relative to this Agreement in any public records except as may be required by
the federal securities laws.
15. Notice: The amount or rate of real estate commissions is not fixed by law.
They are set by each Broker individually and may be negotiable between the
Client and the Broker.
16. For Connecticut transactions, this Agreement shall be subject to Section
46a-64 of the Connecticut General Statutes, as amended, and governed by and
construed in accordance with the laws of the State of Connecticut.
17. The heirs, transferees, successors, and assigns of the parties hereof shall
be duly bound by the provisions hereof, provided Broker may not assign or
otherwise transfer its right or obligation hereunder.
18. The terms of the Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland.
19. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above stated.
F35
Non-Exclusive Brokerage Agreement
and year first above stated.
CLIENT:
FEDERAL REALTY INVESTMENT TRUST
By: Ron D. Kaplan
--------------------------------
Ron D. Kaplan
Vice President, Capital Markets
By: Robert S. Wennet
--------------------------------
Robert S. Wennett
Senior Vice President, Acquisitions
BROKER:
WESTPORT REALTY ADVISORS, INC.
By: Jack Alan Guttman
--------------------------------
Jack Alan Guttman
President
JACK ALAN GUTTMAN
Jack Alan Guttman
------------------------------------
F36
SECOND AMENDMENT
dated as of August 1, 1996
to the
CREDIT AGREEMENT
dated as of September 30, 1994
between
FEDERAL REALTY INVESTMENT TRUST
and
FIRST UNION NATIONAL BANK OF VIRGINIA
F37
SECOND AMENDMENT TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as
of August 1, 1996 and is between FEDERAL REALTY INVESTMENT TRUST, a District of
Columbia unincorporated business trust (the "Borrower"), and FIRST UNION
NATIONAL BANK OF VIRGINIA, a national banking association (the "Bank").
RECITALS
WHEREAS, the Borrower and the Bank are parties to a Credit Agreement
dated as of September 30, 1994, as amended by a First amendment to Credit
Agreement, dated as of April 30, 1996, (as so amended, the "Credit Agreement")
pursuant to which the Bank has established in favor of the Borrower a
$50,000,000 unsecured line of credit; and
WHEREAS, the Borrower has requested that the Credit Agreement be amended
to extend the maturity date of the line of credit from August 1, 1998 to
August 1, 2000; and
WHEREAS, the Bank is willing to amend the Credit Agreement on the terms
and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. Terms used herein and not defined which are
-----------
defined in the Credit Agreement shall have for the purposes hereof the
respective meanings set forth therein.
Section 2. Amendment to Section 1.1 of the Credit Agreement. Section
------------------------------------------------
1.1 of the Credit Agreement is amended by substituting "August 1, 2000" for
"August 1, 1998" in clause (i) of the definition of "Termination Date" (which
amendment extends the maturity date of the Line of Credit Commitment from
August 1, 1998 to August 1, 2000).
Section 3. Amendment to Section 2.13 of the Credit Agreement. Section
-------------------------------------------------
2.13 of the Credit Agreement is amended by substituting "August 1, 1998" for
"August 1, 1996" in the sixth line of such section (which amendment extends the
date on or before which the borrower is prohibited from reducing or terminating
the Line of Credit Commitment from August 1, 1996 to August 1, 1998).
Section 4. Representations and Warranties. The Borrower represents and
------------------------------
warrants to the Bank that (i) the execution, delivery and performance by the
Borrower of this Amendment have been duly authorized by all necessary corporate
action, (ii) this Amendment constitutes the valid, binding and enforceable
obligation of the Borrower (subject, as to enforceability, to the exceptions set
forth in Section 5.3 of the Credit Agreement), (iii) the Borrower has no
defense, right of set-off or counterclaim of any nature in connection with its
obligations under the Credit Agreement, (iv) the representations and warranties
of the Borrower set forth in the Credit Agreement are true and correct as of the
date of this
F38
Amendment as if made as of the date of this Amendment (unless such
representations and warranties specifically relate to an earlier date and except
to the extent that the Borrower has notified the Bank in writing to the contrary
and such notice has been accepted by the Bank) and (v) no Default has occurred
and is continuing.
Section 5. Costs and Expenses. The Borrower agrees to pay all costs
------------------
and expenses incurred by the Bank in connection with the preparation, execution
and delivery of this Amendment and any note, document or instrument delivered in
connection herewith, including the reasonable fees and expenses of counsel for
the Bank.
Section 6. Effectiveness. This Amendment shall become effective as
-------------
of the date (the "Amendment Effective Date") on which the Bank shall have
received (i) a copy of this Amendment duly executed by an authorized officer of
the Borrower and (ii) the original of a promissory note substantially in the
form of Exhibit A hereto (the "Note") executed by an authorized officer of the
Borrower (which promissory note shall replace the promissory note dated
April 30, 1996 made by the Borrower in favor of the Bank in the maximum
principal amount of $50,000,000). On the Amendment Effective Date the Credit
Agreement shall be automatically amended as set forth herein. On and after the
Amendment Effective Date, the rights and obligations of the Borrower and the
Bank with respect to the period prior to the Amendment Effective Date shall
continue to be governed by the provisions of the Credit Agreement.
Section 7. Integration; Confirmation. On and after the amended
-------------------------
Effective Date, each reference in the Credit Agreement to "this Agreement,"
"herein," "hereunder" or words of similar import, and each reference in any note
or other document delivered in connection with the Credit Agreement to the
"Credit Agreement," shall be deemed to be a reference to the Credit Agreement as
amended by this Amendment, and the Credit Agreement as so amended shall be read
as a single, integrated document. Except as amended by this Amendment, all other
terms and provisions of the Credit Agreement shall continue in full force and
effect and unchanged and are hereby confirmed in all respects.
Section 9. Counterparts. This Amendment may be signed in any number of
------------
counterparts, each of which shall be an original, all of which taken together
shall constitute a single integrated agreement with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Section 10. Governing Law. This Amendment and the Note shall be
-------------
deemed to be contracts made under seal and shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.
F39
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
FEDERAL REALTY INVESTMENT TRUST
By Ron D. Kaplan
--------------------------------
Ron D. Kaplan
Vice President - Capital Markets
4800 Hampden Lane, Suite 500
Bethesda, Maryland 20814
Attention: Legal Department
FIRST UNION NATIONAL BANK OF VIRGINIA
By William A. Richardson
--------------------------------
William A. Richardson
Vice President
1970 Chain Bridge Road
McLean, Virginia 22102-4099
F40
THIRD AMENDMENT
dated as of August 8, 1996
to the
CREDIT AGREEMENT
dated as of September 30, 1994
between
FEDERAL REALTY INVESTMENT TRUST
and
FIRST UNION NATIONAL BANK OF VIRGINIA
F41
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is dated as of
August 8, 1996 and is between FEDERAL REALTY INVESTMENT TRUST, a District of
Columbia unincorporated business trust (the "Borrower"), and FIRST UNION
NATIONAL BANK OF VIRGINIA, a national banking association (the "Bank").
RECITALS
WHEREAS, the Borrower and the Bank are parties to a Credit Agreement dated
as of September 30, 1994, as amended by a First amendment to Credit Agreement,
dated as of April 30, 1996, and a Second Amendment to Credit Agreement dated as
of August 1, 1996, (as so amended, the "Credit Agreement") pursuant to which the
Bank has established in favor of the Borrower a $50,000,000 unsecured line of
credit; and
WHEREAS, the Borrower has requested that the Credit Agreement be amended to
extend the maturity date of the line of credit from August 1, 2000 to August 1,
2001; and
WHEREAS, the Bank is willing to amend the Credit Agreement on the terms and
conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definitions. Terms used herein and not defined which are
-----------
defined in the Credit Agreement shall have for the purposes hereof the
respective meanings set forth therein.
Section 2. Amendment to Section 1.1 of the Credit Agreement. Section 1.1
------------------------------------------------
of the Credit Agreement is amended by substituting "August 1, 2001" for "August
1, 2000" in clause (i) of the definition of "Termination Date" (which amendment
extends the maturity date of the Line of Credit Commitment from August 1, 2000
to August 1, 2001).
Section 3. Amendment to Section 2.13 of the Credit Agreement. Section
-------------------------------------------------
2.13 of the Credit Agreement is amended by substituting "August 1, 1999" for
"August 1, 1998" in the sixth line of such section (which amendment extends the
date on or before which the borrower is prohibited from reducing or terminating
the Line of Credit Commitment from August 1, 1998 to August 1, 1999).
Section 4. Representations and Warranties. The Borrower represents and
------------------------------
warrants to the Bank that (i) the execution, delivery and performance by the
Borrower of this Amendment have been duly authorized by all necessary corporate
action, (ii) this Amendment constitutes the valid, binding and enforceable
obligation of the Borrower (subject, as to enforceability, to the exceptions set
forth in Section 5.3 of the Credit Agreement), (iii) the Borrower has no
defense, right of set-off or counterclaim of any nature in connection with its
obligations under the Credit Agreement, (iv) the representations and warranties
of the
F42
Borrower set forth in the Credit Agreement are true and correct as of the date
of this Amendment as if made as of the date of this Amendment (unless such
representations and warranties specifically relate to an earlier date and except
to the extent that the Borrower has notified the Bank in writing to the contrary
and such notice has been accepted by the Bank) and (v) no Default has occurred
and is continuing.
Section 5. Costs and Expenses. The Borrower agrees to pay all costs and
------------------
expenses incurred by the Bank in connection with the preparation, execution and
delivery of this Amendment and any note, document or instrument delivered in
connection herewith, including the reasonable fees and expenses of counsel for
the Bank.
Section 6. Effectiveness. This Amendment shall become effective as of the
-------------
date (the "Amendment Effective Date") on which the Bank shall have received (i)
a copy of this Amendment duly executed by an authorized officer of the Borrower
and (ii) the original of a promissory note substantially in the form of Exhibit
a hereto (the "Note") executed by an authorized officer of the Borrower (which
promissory note shall replace the promissory note date August 1, 1996 made by
the Borrower in favor of the Bank in the maximum principal amount of
$50,000,000). On the Amendment Effective Date the Credit Agreement shall be
automatically amended as set forth herein. On and after the Amendment Effective
Date, the rights and obligations of the Borrower and the Bank with respect to
the period prior to the Amendment Effective Date shall continue to be governed
by the provisions of the Credit Agreement.
Section 7. Integration; Confirmation. On and after the amended Effective
-------------------------
Date, each reference in the Credit Agreement to "this Agreement," "herein,"
"hereunder" or words of similar import, and each reference in any note or other
document delivered in connection with the Credit Agreement to the "Credit
Agreement," shall be deemed to be a reference to the Credit Agreement as amended
by this Amendment, and the Credit Agreement as so amended shall be read as a
single, integrated document. Except as amended by this Amendment, all other
terms sand provisions of the Credit Agreement shall continue in full force and
effect and unchanged and are hereby confirmed in all respects.
Section 9. Counterparts. This Amendment may be signed in any number of
------------
counterparts, each of which shall be an original, all of which taken together
shall constitute a single integrated agreement with the same effect as if the
signatures thereto and hereto were upon the same instrument.
Section 10. Governing Law. This Amendment and the Note shall be deemed to
-------------
be contracts made under seal and shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.
F43
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
FEDERAL REALTY INVESTMENT TRUST
By Ron D. Kaplan
--------------------------------
Ron D. Kaplan
Vice President - Capital Markets
4800 Hampden Lane, Suite 500
Bethesda, Maryland 20814
Attention: Legal Department
FIRST UNION NATIONAL BANK OF VIRGINIA
By William A. Richardson
--------------------------------
William A. Richardson
Vice President
1970 Chain Bridge Road
McLean, Virginia 22102-4099
F44
THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT
---------------------------------------------
This Third Amendment to Revolving Credit Agreement ("this Third
Amendment"), is made the 1st day of July, 1996, by and between FEDERAL REALTY
INVESTMENT TRUST, an unincorporated business trust organized under the laws of
the District of Columbia ("Borrower"), having an office at 4800 Hampden Lane,
Suite 500, Bethesda, Maryland 20814, and CORESTATES BANK, N.A., a national
banking association ("Bank"), having an office at FC1-8-10-67, 10th floor,
Widener Building 1339 Chestnut Street, Philadelphia, Pennsylvania 19107.
Background
----------
A. Borrower and Bank are parties to a Revolving Credit Agreement dated as
of September 1, 1993, as amended by a First Amendment to Revolving Credit
Agreement dated January 31, 1994, and a Second Amendment to Revolving Credit
Agreement dated September 30, 1994 (as so amended, the "Revolving Credit
Agreement"). All capitalized terms used but not specifically defined herein
have the meanings defined in the Revolving Credit Agreement.
B. Borrower has requested Bank to modify the rate of interest payable on
Loans and to extend the commitment Termination Date.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound
hereby, Borrower and Bank agree as follows:
F45
1. Henceforth, the Commitment Termination Date shall be the date that is
five (5) years after the date of this Third Amendment.
2. Henceforth, the term "LIBOR Spread" shall mean three quarters of one
percent per annum (that is, 75 "basis points").
3. Section 5.07(d) of the Revolving Credit Agreement is hereby deleted and
the following is inserted in its place:
"(d) Recourse Mortgage Debt in accordance with Section 5.04 (a)".
4. Henceforth, the term "Core Region" shall include Chicago, Illinois.
5. Section 6.15 of the Revolving Credit Agreement is hereby deleted and
the following is inserted in its place:
"Assets. At least fifty percent (50%) of the assets of the Borrower, on a
------
Consolidated basis, shall at all times consist of retail properties and/or
residential apartment buildings."
6. Except as specifically modified hereby, the Revolving Credit Agreement
remains in full force and effect, in accordance with its terms. Borrower hereby
ratifies and confirms all of Borrower's obligations to Bank under the Revolving
Credit Agreement and represents to, and agrees with, Bank that Borrower has no
defense, set-off or counterclaim to or against any of Borrower's obligations
under the Revolving Credit Agreement.
IN WITNESS WHEREOF, Borrower and Bank have executed this Third Amendment as
of the day and year first above written.
F46
FEDERAL REALTY INVESTMENT TRUST
Rebecca Dawes By: Ron D. Kaplan
- -------------------- --------------------------------
Witness Ron D. Kaplan, Vice President
- Capital Markets
CORESTATES BANK, N.A.
By: Glenn W. Gallagher
--------------------------------
Glenn W. Gallagher,
Vice President
F47
THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT
This THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT (the "Third Amendment")
is entered into as of the 7th day of August, 1996, by and between FEDERAL REALTY
INVESTMENT TRUST, a District of Columbia unincorporated business trust (the
"Borrower"), and SIGNET BANK, a Virginia Corporation, a successor by merger
dated October 31, 1995 to Signet Bank/Maryland.
PREFACE
Reference is made to the Revolving Credit Agreement dated as of June 22,
1993 between the Borrower and the Bank, as amended by the First Amendment to
Revolving Credit Agreement dated as of September 30, 1994 (as amended, the
"Credit Agreement"), and as further amended by the Second Amendment to Revolving
Credit Agreement dated as of October 23, 1995 (as amended the "Credit
Amendment"). Except as otherwise provided, capitalized terms used herein and
not defined herein shall have the meanings set forth in the Credit Agreement.
The Borrower has requested that the Credit Agreement be amended as
hereinafter provided to extend the Termination Date and to modify certain other
terms contained in the Credit Agreement. The Bank is willing to agree to such
requests, subject to the terms and conditions contained herein.
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendments to the Credit Agreement. The Credit Agreement is hereby
amended as follows:
(a) Section 2.1 (a) of the Credit Agreement is amended by deleting
the number "$30,000,000" in the fifth line and inserting in lieu
thereof the number "25,000,000".
(b) Section 2.1 (b) of the Credit Agreement is hereby amended by
deleting the date "July 1, 1998" in the first line of such
subsection and inserting in lieu thereof the date "July 1, 2001".
(c) Section 2.3 (a) (vi) is amended by deleting the existing Section
2.3 (a) (vi) and inserting in lieu thereof the following:
"The Applicable Margin means the applicable margin set forth in
the table below used in calculating the interest rate applicable
to Prime
F48
Rate Loans and Euro-Dollar Loans which shall vary from time to
time in accordance with the borrower's long-term unsecured debt
ratings. The Applicable Margin to be used in calculating the
interest rate applicable to different Loans shall vary from time
to time in accordance with Borrower's then applicable (x) Moody's
debt rating and (y) S&P debt rating as the case may be. The
applicable debt ratings and the Applicable Margin are set forth
in the following table:
Euro-Dollar Loans Prime Rate Loans
S&P Rating Moody's Rating Applicable Margin Applicable Margin
- ---------- -------------- ----------------- -----------------
A or higher A2 or higher .45% 0%
BBB to A- Baa2 to A3 .75% 0%
BBB- Baa3 1.50% 0%
S&P means Standard & Poor's Ratings Group and its successors and
Moody's means Moody's Investors Service, Inc. and its successors.
In the event the Borrower receives ratings from S&P and Moody's
that are not equivalent, the most recent rating in which S&P and
Moody's had equivalent ratings will be used to determine the
applicable margin.
(d) Section 3.1 (b) of the Credit Agreement is amended by deleting
the existing Section 3.1 (b) and inserting in lieu thereof the
following:
"For the period from the date hereof to but not including the
Termination Date, the Borrower shall pay to the Bank a fee at a
rate in accordance with Borrower's then applicable (x) Moody's
debt rating, and (y) S&P debt rating as the case may be, on the
average unused portion of the Commitment, such fee shall be
payable in arrears on the first day of January, April, July, and
October of each year, and on the Termination Date. The
applicable rating and annual fee are set forth in the table
below:
Annual
S&P Rating Moody's Rating Fee
---------- -------------- ------
A or higher A2 or higher .125%
BBB to A- Baa2 to A3 .125%
BBB- or lower Baa3 to lower .25%
In the event the Borrower receives ratings from S&P and Moody's
that
F49
are not equivalent, the most recent rating in which S&P and
Moody's had equivalent ratings will be used to determine the
Annual Fee.
(e) Section 3 of the Credit Agreement is amended by adding a new
section 3.6 to read as follows:
"3.6 Reduction of Commitment. The Borrower shall have the right
at any time from time to time upon five (5) Business Days prior
written notice to the Bank to reduce by $1,000,000 or an integral
multiple of $1,000,000 in excess thereof or terminate entirely
the unborrowed portion of the then Commitment. Upon the
effective date of any such reduction or termination, the Borrower
shall pay to the Bank the full amount of any fees then accrued on
the reduction. No reduction or termination of the Commitment may
be reinstated."
(f) Section 7.15 (a) of the Credit Agreement (as amended by Section
1(j) of the First Amendment) is amended by deleting the phrase
"retail shopping centers" in the tenth line and inserting in lieu
thereof the phrase "retail properties".
(g) Section 7.15 (b) of the Credit Agreement is amended by deleting
the number "5%" in the seventh line and inserting in lieu thereof
the number "10%".
2. Representations and Warranties. The Borrower and the undersigned
hereby certify that (i) each of the representations and warranties made in or in
connection with the Credit Agreement and this Third Amendment are true and
correct (except to the extent the Borrower has previously notified the Bank to
the contrary) as of the date hereof; (ii) no Default or Event of Default has
occurred and is continuing or will occur as a result of this Third Amendment or
the transactions contemplated hereby; and (iii) the execution and delivery of
this Third Amendment and the performance of the Borrower's obligations under the
Credit Agreement, as amended hereby, have been approved by all necessary action
of the Borrower and the officer executing this Third Amendment has been duly
authorized to execute and deliver this Third Amendment on behalf of the
Borrower.
3. Conditions to Amendment. The effectiveness of the agreement of
the Bank to this Third Amendment is subject to the satisfaction of the following
conditions precedent:
a. The Bank shall have received the following, all of which
must be in a form and substance satisfactory tot he Bank and in its sole
discretion:
(i) this Third Amendment, duly executed by the Borrower and the
Bank;
F50
(ii) a Third Amended Revolving Credit Note, in the form Attached
hereof as Exhibit A (the "Third Amended Revolving Credit
Note"), duly executed by the Borrower;
(iii)written confirmation from the Borrower that it has executed
agreements with First Union National Bank of Virginia ("First Union"),
Corestates Bank, N.A. ("Corestates"), and Mellon Bank, N.A. ("Mellon")
which amend their respective credit agreements for a term and rate similar
to that of the Bank.
b. All representations and warranties made in or in connection
with the Credit Agreement and this Third Amendment shall be true,
correct and complete (except to the extent the Borrower has
previously notified the Bank to the contrary) on and as of the
date hereof.
c. No Default or Event of Default under the Credit Agreement
shall have occurred and be continuing or will occur as a result
of this Third Amendment or the transactions contemplated hereby.
4. No Claims or Defenses. The Borrower acknowledges and agrees that
its obligations under the Credit Agreement, as amended hereby, are its valid
obligations and, as of the date hereof, there are no claims, setoffs or defenses
to the payment or performance by the Borrower of such obligations, and that the
Bank may enforce the payment and performance of such obligations as set forth in
the Credit Agreement, as amended hereby, and the Third Amended Revolving Credit
Note.
5. Counterpart Execution. This Third Amendment may be executed in
any number of counterparts, and by the different parties on different
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts taken together shall constitute one and the
same instrument. In making proof of this agreement it shall only be necessary
to account for and produce one such counterpart.
6. Entire Agreement. From and after the effectiveness of this Third
Amendment, the Credit Agreement (as amended hereby) and the Third Amended
Revolving Credit Note constitute the entire understanding of the parties with
respect to the subject matter thereof and any prior agreements, whether written
or oral, or contemporaneous oral agreements, with respect there to are
superseded hereby.
7. Governing Law. The Credit Agreement, this Third Amendment and
the Third Amended Revolving Credit Note, and the rights and duties of the
parties hereto and thereto, including matters of construction, validity and
performance, shall be governed and determined in accordance with the laws of the
state of Maryland without giving effect to the choice of laws thereof.
F51
9. References to the Credit Agreement and the Note. Except as herein
specifically amended the Credit Agreement shall remain in full force and effect
in accordance with its terms. From and after the effectiveness hereof, whenever
reference is made in any agreement (including without limitation the Credit
Agreement), note, certificate, noticed document, letter or conversation to the
Credit Agreement or to the Note, such reference shall, without more, be deemed
to refer to the Credit Agreement, as amended hereby, or to the Third Amended
Revolving Credit Note, as applicable.
IN WITNESS WHEREOF of the parties hereto have executed this Third
Amendment as of the date first written above.
FEDERAL REALTY INVESTMENT TRUST
By: Ron Kaplan
-------------------------------
Name: Ron Kaplan
-------------------------------
Title:Vice President
-------------------------------
SIGNET BANK, a Virginia corporation, a successor by
merger dated October 31, 1995 to Signet Bank/Maryland
By: John A. Schissel
-------------------------------
Name: John A. Schissel
-------------------------------
Title:Vice President
-------------------------------
Attachments
Exhibit A -- Form of Amended Revolving Credit Note
F52
FOURTH AMENDMENT TO CREDIT AGREEMENT
------------------------------------
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is made this
9th day of August, 1996 by and between FEDERAL REALTY INVESTMENT TRUST, a
District of Columbia unincorporated business trust (the "Borrower"), and MELLON
BANK, N.A., a national banking association (the "Bank").
Background
----------
A. Reference is made to the Credit Agreement dated as of February 11,
1994 by and between the Borrower and the Bank, as amended by a First Amendment
to Credit Agreement dated as of September 30, 1994, a Second Amendment to Credit
Agreement dated as of March 17, 1995 and a Third amendment to Credit Agreement
dated as of June 8, 1995 (collectively, the "Original Agreement") pursuant to
which the Bank extended to the Borrower a revolving credit facility in the
maximum amount of $20,000,000. Capitalized terms used herein and not otherwise
defined herein shall have the meaning provided in the Original Agreement.
B. The Borrower has requested that the Bank increase the maximum amount
of the revolving credit facility from $20,000,000 to $30,000,000, extend the
termination date from April 30, 1998 to July 1, 2001 and make certain other
changes as set forth herein.
C. Bank has agreed to make such changes subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and
F53
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. The Original Agreement is hereby amended as follows:
a. The definition of "Available Amount" appearing in Section 1.1 of
the Original Agreement is hereby deleted in its entirety and substituted with
the following:
"'Available Amount' means, as of any date, $30,000,000 minus the
aggregate unpaid principal amount of Advances outstanding on such
date."
b. The definition of "Termination Date" appearing in Section 1.1 of
the Original Agreement is hereby deleted in its entirety and substituted with
the following:
"'Termination Date' means the latter of (i) July 1, 2001 or (ii)
the date to which the Line of Credit Period has been extended
pursuant to Section 2.10."
c. Section 2.4(b) of the Original Agreement is hereby deleted in its
entirety and substituted with the following:
"If the Borrower elects that an Advance shall bear interest at
the Euro-Dollar-Based Rate, such Advance shall bear interest on
the outstanding principal amount thereof, for each day during the
applicable Interest Period, at a rate per annum equal to the sum
of .75% plus the applicable Adjusted London Interbank Offered
Rate. All such interest shall be payable on the first day of each
month."
d. Section 2.10 is hereby deleted in its entirety and substituted
with the following:
"The Bank shall review the Line of Credit Commitment on or
before July 1, each year, commencing July 1, 1997 and may, in its
F54
sole and absolute discretion, extend the Line of Credit Period
from time to time for an additional one year period. If the Bank
wishes to so extend the Line of Credit Period, it must send
written notice thereof to Borrower on or before July 1 of each
year commencing July 1, 1997. The Bank shall have the
unconditional right not to extend the Line of Credit Period,
notwithstanding that no Event of Default exists. In the event
that Bank fails to send the extension notice described in this
Section, the Bank shall be deemed to have not extended the Line
of Credit Period."
e. Section 5.2 of the Original Agreement is hereby deleted in its
entirety and hereby substituted with the following:
"Minimum Shareholders' Equity. The Borrower will not permit
----------------------------
Shareholders' Equity to be less than $300,000,000 as of the last
day of any calendar quarter."
f. Section 5.4 of the Original Agreement is hereby deleted in its
entirety and substituted with the following:
"Minimum Funds from Operations. The Borrower will not permit
-----------------------------
Funds From Operations to be less than the greater of (i) in any
fiscal year, 90% of the Funds From Operations for the immediately
prior fiscal year and (ii) $30,000,000 in the aggregate for any
period of four consecutive calendar quarters."
g. Section 5.5 of the Original Agreement is hereby deleted in its
entirety and substituted with the following:
"Limitation on Dividends. The Borrower will not during any four
-----------------------
consecutive calendar quarters pay dividends which exceed an
amount equal to the sum of (i) 100% of the Funds From Operations
for such four quarter period and (ii) $5,000,000. The foregoing
covenant w\shall be determined on a quarterly basis."
F55
h. The form of Note attached as Exhibit A to the Original
Agreement, as amended and restated, is hereby amended and restated to read in
its entirety as set forth in the Amended and Restated Note attached as Exhibit A
---------
of this Amendment (the "Amended and Restated Note").
2. From and after the date hereof, all references in the Original
Agreement to the Note shall be to the Amended and Restated Note in the form
attached hereto as Exhibit A and executed in connection with this Amendment, so
---------
as to extend the provisions of the Original Agreement, as modified by this
Amendment, to the Amended and Restated Note.
3. The Borrower hereby certifies that, as of the date hereof:
a. Except as previously disclosed by the Borrower in writing to
Bank, each of the representations and warranties contained in the Original
Agreement, as modified by this Amendment are true and correct;
b. Except as previously disclosed by the Borrower in wiring to
Bank, the Borrower is in compliance with all of the terms, covenants and
conditions contained in the Original Agreement, as provided by this Amendment,
including, without limitation, all of the financial covenants; and
c. There exists no Default or Event of Default under the
Original Agreement.
4. All of the terms, conditions, provisions and covenants in the
Original Agreement, the Note or any documents executed in connection with any of
the foregoing shall remain unaltered and in full force and effect except as
modified by this Amendment.
5. This Amendment shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
F56
6. Each and every one of the terms and provisions of this Amendment
shall be binding upon and shall inure to the benefit of the Borrower, the Bank
and their respective successors and assigns.
7. This Amendment may be executed in one or more counterparts, each
of which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which all constitute but one and the same
instrument.
8. Until the Bank receives (a) resolutions from the Borrower, in
form reasonably satisfactory to the Bank, authorizing the execution and delivery
of this Amendment and the Amended and Restated Note, (b) an opinion of counsel
to the Borrower, in form reasonably satisfactory to the Bank, (c) a Secretary's
Certificate, (d) a Good Standing Certificate and (e) a Certificate of
Incumbency, the provisions of this Amendment increasing the maximum account of
the revolving credit facility from $20,000,000 to $30,000,000 shall be of no
force or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.
FEDERAL REALTY INVESTMENT TRUST
By: Ron D. Kaplan
--------------------------------
Ron D. Kaplan
Vice President-Capital Markets
MELLON BANK, N.A.
By: Frederick A. Felter
--------------------------------
Frederick A. Felter
Vice President
F57
Exhibit 23
Consent of Independent Accountants
----------------------------------
We have issued our reports dated February 5, 1997 accompanying the
consolidated financial statements and schedules included in the Annual Report
of Federal Realty Investment Trust on Form 10K for the year ended December 31,
1996. We hereby consent to the incorporation by reference of said reports in
the Registration Statements of Federal Realty Investment Trust on Form S-3
(File No. 33-63687, effective December 4, 1995, which pursuant to Rule 429 of
the Securities and Exchange Act of 1934 constitutes a post-effective amendment
to Registration Statement No. 33-51029 effective December 13, 1993; File No.
33-63955, effective November 3, 1995; and File No. 33-15264, effective August
4, 1987).
Grant Thornton LLP
Washington, D.C.
February 18, 1997
F58
5
1,000
12-MOS
DEC-31-1996
DEC-31-1996
$11,041
0
17,294
0
0
0
1,147,865
(223,553)
1,035,306
0
585,584
0
0
597,917
(209,032)
1,035,306
0
174,703
0
57,098
0
0
45,555
28,742
0
0
0
0
0
28,742
.86
0
Current assets and current liabilities are not listed since Federal Realty
does not prepare a classified balance sheet.
