SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: September 26, 1997
FEDERAL REALTY INVESTMENT TRUST
-------------------------------
(Exact name of registrant as specified in its charter)
District of Columbia 1-7533 52-0782497
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
1626 East Jefferson Street, Rockville, Maryland 20852-4041
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 301/998-8100
Exhibit Index appears on page 4.
Item 5. Other Events
During the four months from September 1, 1997 through December 31, 1997,
Federal Realty Investment Trust (the "Trust") acquired seven operating
properties and one property under development.
On September 26, 1997 the Trust purchased the Uptown Shopping Center
located in Portland, Oregon which consists of approximately 72,000 square feet
of retail space and 47 apartment units for $15.7 million. The Trust funded the
acquisition of the Uptown Shopping Center with proceeds from the sale of Town &
Country Shopping Center in Springfield, Illinois, sold on May 13, 1997, and with
proceeds from the sale of Shillington Shopping Center, sold on May 30, 1997. On
October 23, 1997 the Trust purchased, for $20.5 million, the 109,000 square foot
mixed use retail/office building located at 150 Post Street in San Francisco,
California. On December 5, 1997 the Trust purchased the retail portion of the
Fresh Meadows complex in Queens, New York for $49.3 million. The retail
component contains 417,000 square feet comprised of individual main street
retail shops and two neighborhood strip shopping centers. The Trust funded the
acquisition of 150 Post Street and Fresh Meadows with borrowings under its
revolving credit facilities. On December 17, 1997 a limited partnership
("Federal Realty Partners, LP") organized by the Trust acquired the Magruder's
Center and the Courthouse Center, both located in Rockville, Maryland for $12.6
million. The seller contributed the properties to the limited partnership and
received 481,378 partnership units valued at $12.3 million and the Trust
contributed $400,000 in cash. The partnership units are exchangeable, at the
option of the Trust, for cash or shares of the Trust. On December 19, 1997 the
Trust purchased the 295,000 square foot Peninsula Shopping Center located in the
Los Angeles, California suburb of Palos Verdes at a cash purchase price of $43.5
million. The Trust funded this acquisition with borrowings under its revolving
credit facilities. Financial statements and proforma financial information on
these properties (the "Acquired Properties") are submitted in Item 7 of this
report.
On December 16, 1997 the Trust, through a Limited Liability Company (Street
Retail Forest Hills II, LLC, "SRFHII") organized by the Trust, purchased a main
street retail property in Forest Hills, New York for $3.4 million. The Trust
contributed $3.1 million of the cost with the remaining cost of $300,000 being
contributed by the minority interest. The Trust funded the acquisition of this
property with borrowings under its revolving credit facilities. Financial
statements for this property are not available, but it is not significant. On
October 22, 1997 a Limited Liability Company ("Old Town Center LLC") organized
by the Trust acquired the Old Town Center in Los Gatos, California for
approximately $6.2 million. The property is currently being redeveloped. The
Trust contributed all but $400,000 of the purchase price to the Old Town Center
LLC and will contribute all amounts necessary to fund the development. The
minority partner has an interest in the profits of the property after the Trust
receives a stated return on its deemed investment in the property. Financial
statements are not presented or available since the property is currently under
redevelopment.
2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements, pro forma financial information and
exhibits are filed as part of this report:
(a) Financial statements of the real estate operations acquired, prepared
pursuant to Rule 3.14 of Regulation S-X:
Page No.
1.RREEF West-VI One, Inc. - Uptown Shopping Center
Independent Auditors' Report 5
Statement of Revenues and Certain Expenses 6
Notes to Statement of Revenues and Certain Expenses 7
2.150 Post Street, Inc.
Independent Auditors' Report 8
Statement of Revenues and Certain Expenses 9
Note to Statement of Revenues and Certain Expenses 10-11
3.Fresh Meadows Commercial Property
Report of Independent Accountants 12
Statements of Revenues and Certain Expenses 13
Notes to Statements of Revenues and Certain Expenses 14
4.The Magruder Center
Independent Auditor's Report 15
Statement of Revenues and Certain Expenses 16
Notes to Statement of Revenues and Certain Expenses 17
5.The Courthouse Center
Independent Auditor's Report 18
Statement of Revenues and Certain Expenses 19
Notes to Statement of Revenues and Certain Expenses 20
6.The Peninsula Shopping Center
Report of Independent Certified Public Accountants 21
Historical Summary of Gross Income
and Direct Operating Expenses 22
Notes to Historical Summary of Gross Income
and Direct Operating Expenses 23
(b)Pro forma financial information required pursuant to Article 11 of Regulation
S-X:
1. Pro Forma Condensed Financial Statements (unaudited) of
Federal Realty Investment Trust and the Acquired Properties
Pro Forma Condensed Balance Sheet - September 30, 1997 24
Pro Forma Condensed Statement of Operations
Year ended December 31, 1996 25
Pro Forma Condensed Statement of Operations
Nine months ended September 30, 1997 26
3
The Pro Forma Condensed Statement of Operations for the year ended December
31, 1996 is based on audited historical financial statements of operations of
the Acquired Properties and the Trust after giving effect to the acquisition of
the Acquired Properties and the adjustments as described in the accompanying
notes to the pro forma financial statements.
The Pro Forma Condensed Balance Sheet and Statement of Operations for the
nine months ended September 30, 1997 is based on unaudited historical financial
statements of the Acquired Properties and the Trust after giving effect to the
acquisition of the Acquired Properties and the adjustments as described in the
accompanying notes to the pro forma financial statements.
The Proforma Condensed Statements of Operations have been prepared by the
Trust based upon the financial statements of the Acquired Properties. These pro
forma financial statements may not be indicative of the results that actually
would have occurred if the acquisitions had been in effect on the dates
indicated or which may be obtained in the future. The pro forma financial
statements should be read in conjunction with the audited financial statements
and notes of the Acquired Properties filed herein, the audited consolidated
financial statements of the Trust in its Annual Report on Form 10-K for the year
ended December 31, 1996 and the unaudited financial statements of the Trust on
Form 10-Q for the nine months ended September 30, 1997
(c) Exhibits in accordance with the provisions of Item 601 of Regulation S-K:
Item 23. Independent Auditors' Consents
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Federal Realty Investment Trust
(Registrant)
Date: /s/ Cecily A. Ward
------------------
Cecily A. Ward
Vice President - Controller
(Principal Accounting Officer)
EXHIBIT INDEX
ITEM NO. Page No.
- -------- --------
(23) Independent Auditors' Consents 27
4
INDEPENDENT AUDITORS' REPORT
To the Stockholders of RREEF West-VI One, Inc. -
Uptown Shopping Center:
We have audited the statement of revenues and certain expenses of RREEF West-VI
One, Inc. - Uptown Shopping Center for the year ended December 31, 1996. This
financial statement is the responsibility of RREEF West-VI One, Inc. - Uptown
Shopping Center's management. Our responsibility is to express an opinion on
the financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amount and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission (for inclusion in the filing of Form 8-K of Federal Realty
Investment Trust as a result of the acquisition of this property). Material
amounts, described in Note 1 to the statement of revenues and certain expenses,
that would not be comparable to those resulting from future operations of the
acquired property are excluded and the statement is not intended to be a
complete presentation of the acquired property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses, described in Note 1,
of RREEF West-VI One, Inc. - Uptown Shopping Center for the year ended December
31, 1996 in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
October 17, 1997
5
RREEF WEST-VI ONE, INC.-UPTOWN SHOPPING CENTER
STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
- -----------------------------------------------------------
REVENUES:
Rental income $1,289,107
Recoverable expenses 307,985
Other income 115,665
----------
Total revenues 1,712,757
CERTAIN EXPENSES:
Property operating 256,821
Real estate taxes 149,755
Management fees 74,135
----------
Total certain expenses 480,711
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES $1,232,046
==========
See notes to statement of revenues and certain expenses.
6
RREEF WEST-VI ONE, INC.-UPTOWN SHOPPING CENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Uptown Shopping Center, a shopping center which includes residential units,
located in Portland, Oregon was acquired by Federal Realty Investment Trust
September 26, 1997. The statement of revenues and certain expenses
includes information related to the operations of Uptown Shopping Center
for the period from January 1, 1996 through December 31, 1996 as recorded
by the property's building's previous owner, RREEF West-VI One, Inc., a
Delaware corporation.
The accompanying historical financial statement information is presented to
comply with the rules and regulations of the Securities and Exchange
Commission. Accordingly, the financial statement is not representative of
the actual operations for the year ended December 31, 1996 as certain
expenses, which may not be comparable to the expenses expected to be
incurred in the future operations of the acquired property, have been
excluded. Expenses excluded consist of interest, depreciation and
amortization, and other costs not directly related to the future operations
of the acquired property.
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
RENTAL INCOME - Rental income is recognized on a straight-line basis over
the terms of the related leases.
PROPERTY OPERATING EXPENSES - Property operating expenses consist primarily
of utilities, insurance, repairs and maintenance, security and safety,
cleaning and other administrative expenses.
MANAGEMENT AND LEASING FEES - The property was managed by RREEF Management
Company for a property management fee paid monthly in arrears based on an
annual rate of 4.5% of retail tenant cash receipts and 5.5% of residential
tenant cash receipts.
2. OPERATING LEASES
Operating revenue is obtained principally from residential and retail
tenant rentals under noncancelable operating leases. Residential tenant
leases are renewed annually. Future minimum rentals under noncancelable
operating leases of retail tenants as of December 31, 1996 are
approximately as follows:
1997 $ 992,006
1998 962,882
1999 859,928
2000 792,121
2001 663,512
Thereafter 3,124,794
----------
Total $7,395,243
==========
7
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Trustees
Federal Realty Investment Trust:
We have audited the accompanying statement of revenues and certain expenses of
150 Post Street for the year ended December 31, 1996. This financial statement
is the responsibility of 150 Post Street, Inc.'s management. Our responsibility
is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and certain expenses is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
certain expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the statement of revenues and certain expenses. We
believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and for inclusion in a Form 8-K of Federal Realty
Investment Trust, as described in note 1. The presentation is not intended to be
a complete presentation of 150 Post Street's revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above
presents fairly, in all material respects, the revenues and certain expenses,
described in note 1, of 150 Post Street for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
March 14, 1997
8
150 POST STREET
Statement of Revenues and Certain Expenses
For the year ended December 31, 1996
Revenues:
Rental income $2,087,006
Expense recoveries 272,499
Other income 18,546
----------
2,378,051
----------
Certain expenses:
Real estate taxes and insurance 349,977
Repairs and maintenance 157,345
Utilities 154,007
General and administrative 111,076
Cleaning 89,063
Grounds and security 27,306
----------
888,774
----------
Revenues in excess of certain expenses $1,489,277
==========
See note to statement of revenues and certain expenses
9
150 POST STREET
Note to Statement of Revenues and Certain Expenses
For the year ended December 31, 1996
(1) Description and Summary of Significant Accounting Policies
----------------------------------------------------------
(a) Description (unaudited)
-----------
150 Post Street, is a combination retail and office building located in San
Francisco, California. As of December 31, 1996, the property was
approximately 88% occupied.
Federal Realty Investment Trust purchased 150 Post Street from 150 Post
Street, Inc., a wholly-owned subsidiary of RL(America), Inc., on October
23, 1997. The accompanying statement of revenues and certain expenses
includes information related to the operations of 150 Post Street for the
period from January 1, 1996 through December 31, 1996 as recorded by the
property's previous owner.
(b) Basis of Presentation
---------------------
The accompanying statement of revenues and certain expenses is presented on
the accrual basis of accounting. The statement of revenues and certain
expenses has been prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and for inclusion in
a Form 8-K of Federal Realty Investment Trust and is not intended to be a
complete presentation of 150 Post Street's revenues and expenses for the
period presented. Certain expenses, which may not be comparable to the
expenses expected to be incurred in the future operations of 150 Post
Street, have been excluded. Expenses excluded consist of interest,
depreciation and amortization, advisory and management fees and other costs
not directly related to the future operations of the property.
(c) Management's Use of Estimates
-----------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(d) Rental Income
-------------
Rental income is recognized on a straight-line basis over the terms of the
related leases.
10
150 POST STREET
Note to Statement of Revenues and Certain Expenses, continued
For the year ended December 31, 1996
(e) Leases
------
Operating revenues consisted primarily of tenant rentals under
noncancelable operating leases. Future minimum rental under these leases
as of December 31, 1996 are approximately as follows:
1997 $2,007,793
1998 1,519,096
1999 215,671
2000 94,551
2001 46,669
Thereafter -
----------
Total $3,883,780
==========
11
REPORT OF INDEPENDENT ACCOUNTANTS
To the Owners of the
Fresh Meadows Property
We have audited the accompanying statement of revenues and certain expenses of
the Fresh Meadows Commercial Property (the "Property") as described in Note 1
for the year ended December 31, 1996. This financial statement is the
responsibility of the Property's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit 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 statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission and is not intended to be a complete presentation of the
Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses of the Property for the
year ended December 31, 1996 in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
Chicago, Illinois
November 26, 1997
12
Fresh Meadows Commercial Property
Statements of Revenues and Certain Expenses
(DOLLARS IN THOUSANDS)
For the Nine For the Year
Months Ended Ended
September 30, December 31,
1997 1996
---------------------------------
(Unaudited)
Revenues:
Rental income $5,498 $7,452
Tenant recoveries and other income 1,345 1,693
--------------------------
Total revenues 6,843 9,145
--------------------------
Expenses:
Real estate taxes 740 1,054
Repairs and maintenance 470 616
Property management 157 201
Utilities 189 374
Insurance 57 146
Janitorial 369 392
Marketing/Leasing 133 254
Security 110 178
Payroll 90 120
Other 159 431
--------------------------
Total expenses 2,474 3,766
--------------------------
Revenues in excess of certain expenses $4,369 $5,379
==========================
The accompanying notes are an integral part of the financial statements.
13
FRESH MEADOWS COMMERCIAL PROPERTY
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
1. BASIS OF PRESENTATION
The Fresh Meadows Commercial Property (the "Property") is located in the
borough of Queens, New York. During the period under audit, the Property
was owned by the John D. and Catherine T. MacArthur Foundation (the
"Foundation")and MacArthur Holding B, Inc., a controlled affiliated
corporation of the Foundation. Thus, the Foundation, directly and
indirectly, controls the Property.
The Statements of Revenues and Certain Expenses (the"Statements") combined
the results of operations of three commercial shopping centers as of
December 31, 1996 and September 30, 1997.
The unaudited Statement of Revenues and Certain Expenses for the nine
months ended September 30, 1997 reflects, in the opinion of management, all
adjustments necessary for a fair presentation of the interim statement.
All such adjustments are of a normal and recurring nature.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Statements exclude certain expenses such as interest, depreciation and
amortization, professional fees, and other costs not directly related to
the future operations of the Property that may not be comparable to the
expenses expected to be incurred in their proposed future operations.
Management is not aware of any material factors relating to these
properties which would cause the reported financial information not to be
necessarily indicative of future operating results.
In order to conform with generally accepted accounting principles,
management, in preparation of the Statements, is required to make estimates
and assumptions that affect the reported amounts of revenues and certain
expenses during the reporting period. Actual results could differ from
these estimates.
REVENUE AND EXPENSE RECOGNITION
The Statements have been prepared on the accrual basis of accounting.
Rental income is recorded when due from tenants. The effects of scheduled
rent increases and rental concessions, if any, are recognized on a
straight-line basis over the term of the tenant's lease.
3. FUTURE RENTAL REVENUES
Future minimum base rentals due from commercial tenants on non-cancelable
operating leases as of December 31, 1996 are approximately as follows:
1997 $ 6,392
1998 6,386
1999 5,915
2000 5,560
2001 5,130
Thereafter 52,647
-------
Total $82,030
=======
For the year ended December 31, 1996, one tenants' rent was approximately
11.3% of total revenues.
14
Independent Auditor's Report
----------------------------
N. Richard Kimmel
15821 Crabbs Branch Way
Rockville, MD 20855-2635
Dear Mr. Kimmel:
We have audited the accompanying Statement of Revenues and Certain Expenses
of the Magruder Center (the "Property") as described in Note 1 for the year
ended December 31, 1996. This financial statement is the responsibility of you
and your management company. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statement of Revenues and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Statement of
Revenues and Certain Expenses. An audit also includes assessing the accounting
principles used and significant estimates made by you and your management
company, as well as evaluating the overall Statement of Revenues and Certain
Expenses presentation. We believe that our audit of the Statement of Revenues
and Certain Expenses provides a reasonable basis for our opinion.
The accompanying Statement of Revenues and Certain Expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission and is not intended to be a complete presentation of the
Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
Fangmeyer and Fangmeyer
Silver Spring, Maryland
January 9, 1998
15
THE MAGRUDER CENTER
-------------------
STATEMENT OF REVENUES AND CERTAIN EXPENSES
------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
Revenues:
Rental Income - Base $ 760,995
Rental Income - Overage 131,382
Tenant Recoveries 120,784
----------
$1,013,161
Certain Expenses:
Real Estate Taxes 160,789
Repairs and Maintenance - Labor 23,121
Repairs and Maintenance - Other 17,579
Insurance 16,980
Utilities 12,140
Common Area Expenses 2,624
Security 9,779
----------
Total Certain Expenses 243,012
-------
EXCESS OF REVENUES OVER CERTAIN
- ---------------------------------------
EXPENSES $ 770,149
- ----------- ==========
See Accompanying Notes To This Statement
16
THE MAGRUDER CENTER
-------------------
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
---------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
1. Description of Property
-----------------------
The Magruder Center (the "Property") is a commercial shopping center
located in Rockville, Maryland. It was owned during the period under audit
by Mr. N. Richard Kimmel.
2. Summary of Significant Accounting Policies
------------------------------------------
General - The Statement excludes certain expenses such as depreciation,
-------
amortization, management and professional fees, and other expenses not
directly related to the future operation of the Property that may not be
comparable to expenses expected to be incurred in the future operation of
the property under new owners. Management is not aware of any material
factors relating to the property which will cause the reported financial
information not to be necessarily indicative of future revenues and certain
expenses.
Estimates - The preparation of financial statements in conformity with
---------
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of revenues and
certain expenditures. Accordingly, actual results could differ from those
estimates.
Revenue and Expenses Recognition - The financial statement has been
--------------------------------
prepared on the accrual basis of accounting. Accordingly, rental income
and tenant recoveries are recognized when due from the tenant. Expenses
are recognized when incurred.
3. Future Rental Revenues
----------------------
Future minimum base rentals due from tenants on non-cancelable operating
leases as of December 17, 1997 are approximately as follows:
1997 $832,810
1998 768,985
1999 646,336
2000 644,880
2001 590,063
Thereafter 448,490
--------
$ 3,931,564
===========
17
Independent Auditor's Report
----------------------------
Mr. N. Richard Kimmel
RKR Limited Partnership
15821 Crabbs Branch Way
Rockville, MD 20855-2635
Dear Mr. Kimmel:
We have audited the accompanying Statement of Revenues and Certain Expenses
of the Courthouse Center (the "Property") as described in Note 1 for the year
ended December 31, 1996. This financial statement is the responsibility of the
Partnership's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statement of Revenues and Certain
Expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Statement of
Revenues and Certain Expenses. An audit also includes assessing the accounting
principles used and significant estimates made by the Partnership's management,
as well as evaluating the overall Statement of Revenues and Certain Expenses
presentation. We believe that our audit of the Statement of Revenues and
Certain Expenses provides a reasonable basis for our opinion.
The accompanying Statement of Revenues and Certain Expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission and is not intended to be a complete presentation of the
Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Property for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
Fangmeyer and Fangmeyer
Silver Spring, Maryland
January 9, 1998
18
THE COURTHOUSE CENTER
---------------------
STATEMENT OF REVENUES AND CERTAIN EXPENSES
------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
Revenues:
Rental Income - Base $411,358
Tenant Recoveries 84,644
--------
$496,002
Certain Expenses:
Real Estate Taxes 61,576
Repairs and Maintenance - Labor 10,144
Repairs and Maintenance - Other 5,371
Insurance 7,187
Utilities 30,716
Common Area Expenses 1,165
Security 11,825
--------
Total Certain Expenses 127,984
-------
EXCESS OF REVENUES OVER CERTAIN
EXPENSES $368,018
========
See Accompanying Notes to This Statement
19
THE COURTHOUSE CENTER
---------------------
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
---------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
1. Description of Property
-----------------------
The Courthouse Center (the "Property") is a commercial shopping center
located in Rockville, Maryland. It was owned during the period under audit
by the RKR Limited Partnership. Mr. N. Richard Kimmel was the general
partner and was also a limited partner along with an irrevocable children's
trust.
2. Summary of Significant Accounting Policies
------------------------------------------
General - The Statement excludes certain expenses such as depreciation,
-------
amortization, management and professional fees, and other expenses not
directly related to the future operation of the Property that may not be
comparable to expenses expected to be incurred in the future operation of
the property under new owners. Management is not aware of any material
factors relating to the property which will cause the reported financial
information not to be necessarily indicative of future revenues and certain
expenses.
Estimates - The preparation of financial statements in conformity with
---------
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of revenues and
certain expenditures. Accordingly, actual results could differ from those
estimates.
Revenue and Expenses Recognition - The financial statement has been
--------------------------------
prepared on the accrual basis of accounting. Accordingly, rental income
and tenant recoveries are recognized when due from the tenant. Expenses
are recognized when incurred.
3. Future Rental Revenues
----------------------
Future minimum base rentals due from tenants on non-cancelable operating
leases as of December 17, 1997 are approximately as follows:
1997 $ 422,993
1998 290,579
1999 224,229
2000 187,698
2001 187,698
Thereafter 118,582
-----------
$ 1,431,779
===========
20
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Trustees
Federal Realty Investment Trust
We have audited the accompanying Historical Summary of Gross Income and Direct
Operating Expenses ("Historical Summary") of The Peninsula Shopping Center for
the year ended December 31, 1996. The Historical Summary is the responsibility
of the Center's management. Our responsibility is to express an opinion on the
Historical Summary based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Historical Summary is free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the Historical Summary. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the Historical Summary. We believe
that our audit provides a reasonable basis for our opinion.
The accompanying Historical Summary was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission and
excludes certain material items of income and expense, as described in Note B,
that would not be comparable to those resulting from the future operations of
the Center acquired by Federal Realty Investment Trust. The Historical Summary
is not intended to be a complete presentation of the Center's income and
expenses.
In our opinion, the Historical Summary referred to above presents fairly, in all
material respects, the gross income and direct operating expenses as described
in Note B of The Peninsula Shopping Center for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
Grant Thornton LLP
Los Angeles, California
January 22, 1998
21
The Peninsula Shopping Center
HISTORICAL SUMMARY OF GROSS INCOME AND
DIRECT OPERATING EXPENSES
Year ended December 31, 1996
GROSS INCOME
Base rent $3,604,952
Percentage rent 123,759
Expense recoveries 948,305
Other 116,319
----------
Total gross income 4,793,335
DIRECT OPERATING EXPENSES
Real property taxes 353,661
Administrative expenses 206,880
Maintenance and repairs 200,225
Utilities 160,848
Security 98,165
Janitorial 82,307
Insurance 50,421
Parking 49,913
Other 23,270
----------
Total direct operating expenses 1,225,690
----------
Excess of gross income over direct
operating expenses $3,567,645
==========
22
NOTES TO HISTORICAL SUMMARY OF GROSS INCOME AND
-----------------------------------------------
DIRECT OPERATING EXPENSES
-------------------------
Year ended December 31, 1996
NOTE A - NATURE OF BUSINESS
The Peninsula Shopping Center (the "Center") is located on Palos Verdes
Peninsula in Palos Verdes, California. The Center consists of a retail
shopping center with approximately 295,000 square feet of rentable space.
The Center's activities consist of the leasing and operation of the
shopping center. Expense recoveries represent property operating expenses
billed to the tenants, including common area maintenance, real estate taxes
and other recoverable costs. Expense recoveries are recognized in the
period the expenses are incurred. All leases are classified as operating
leases and expire at various times through 2007.
NOTE B - SUMMARY OF ACCOUNTING POLICIES
The following is a summary of the Center's significant accounting policies
applied in the preparation of the accompanying Historical Summary of Gross
Income and Direct Operating Expenses.
Basis of Presentation
---------------------
Federal Realty Investment Trust purchased the Center on December 19, 1997.
The Historical Summary of Gross Income and Direct Operating Expenses has
been prepared for the purpose of complying with Regulation S-X, Rule 3-14
of the Securities and Exchange Commission ("SEC"), which requires certain
information with respect to real estate operations acquired to be included
with certain filings with the SEC. The Historical Summary includes the
historical gross income and direct operating expenses of the Center,
exclusive of certain items of income and expense which are not comparable
to the proposed future operations of the Center. Upon the purchase of the
Center, Federal Realty Investment Trust began operating the shopping center
under its policies and procedures. The excluded income and expense items
are as follows:
1) Depreciation of property and equipment
2) Management fees
Revenue Recognition
-------------------
Lease revenue is recognized over the lease term on a straight-line basis as
it is earned. Revenue from reimbursement by tenants, of costs incurred on
their behalf, is recognized when the expenses are incurred. These expenses
include property taxes and common area maintenance costs.
Use of Estimates
----------------
In preparing the Center's Historical Summary of Gross Income and Direct
Operating Expenses, management is required to make estimates and
assumptions that affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
23
Federal Realty Investment Trust
Pro Forma Balance Sheet
(unaudited)
September 30, 1997
(in thousands)
Acquired Properties Pro Forma Adjustments
Trust Proforma
Actual Debit Credit Combined
ASSETS
Investments
Real estate, at cost $1,299,321 (1) 141,615 $1,440,936
Less accumulated depreciation and amortization (238,815) (2) 1,374 (240,189)
---------- ----------
1,060,506 1,200,747
Mortgage notes receivable 38,256 38,256
---------- ----------
1,098,762 1,239,003
Other assets
Cash 4,687 (2) 2,845 7,532
Notes receivable - officers 1,190 1,190
Accounts receivable 15,923 15,923
Prepaid expenses and other assets, principally 0
property taxes and lease commissions 32,207 32,207
Debt issue costs 3,535 3,535
---------- ----------
$1,156,304 $1,299,390
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Obligations under capital leases $ 126,153 $ 126,153
Mortgages payable 96,007 96,007
Notes payable (Note 1) 69,555 (1) 129,315 198,870
Accrued expenses 17,838 17,838
Accounts payable 7,104 7,104
Dividends payable 16,811 16,811
Security deposits 3,859 3,859
Prepaid rents 3,137 3,137
Senior notes and debentures 255,000 255,000
5.25% Convertible subordinated debentures 75,289 75,289
Investors interest in consolidated assets 21,246 (1) 12,300 33,546
Commitments and contingencies --- ---
Shareholders' equity
Common shares of beneficial interest, no par or stated value,
unlimited authorization, issued 39,167,656 shares 687,324 687,324
Accumulated dividends in excess of Trust net income (214,483) (2) 1,471 (213,012)
---------- ----------
472,841 474,312
Less 62,386 common shares in treasury - at cost, deferred
compensation and subscriptions receivable (8,536) (8,536)
---------- ----------
464,305 465,776
---------- ----------
$1,156,304 $1,299,390
=========== ==========
The Pro Forma Balance Sheet of the Trust gives effect to the acquisition of
the Acquired Properties as though they were acquired at the beginning of the
period presented.
(1) Reflects the acquisition cost of the properties funded by the Trust's
revolving credit facilities and minority shareholder contributions.
(2) Reflects the net income from the acquired properties.
Note 1 - $100 million of Preferred shares were issued on October 6,1997.
The proceeds from the issuance were used to pay down the outstanding lines
of credit.
24
Federal Realty Investment Trust
Pro Forma Condensed Statement of Operations
(unaudited)
Year ended December 31, 1996
(in thousands, except per share data)
Trust Acquired Pro Forma Adjustments Proforma
Actual Properties Debit Credit Combined
Actual
Revenue
Rental income $164,887 $19,287 $184,174
Other income 9,816 251 10,067
Interest income 4,352 0 4,352
-------- ------- --------
179,055 19,538 198,593
Expenses
Interest 45,555 0 (2) 9,050 54,605
Depreciation and amortization 38,154 0 (1) 1,833 39,987
Administrative expenses 9,100 111 (3) 111 9,100
Operating expenses 57,098 6,621 63,719
-------- ------- --------
149,907 6,732 167,411
Income before investors share of operations
and loss on sale of real estate 29,148 12,806 31,182
Investors' share of operations (394) (4) (794) (1,188)
-------- ------- --------
Income before loss on sale of real estate 28,754 12,806 29,994
Loss on sale of real estate (12) (12)
-------- ------- --------
$ 28,742 $12,806 $ 29,982
======== ======= ========
Weighted average number of common shares 33,573 33,573
======== ========
Earnings per share
Income before loss on sale of real estate $ 0.86 $ 0.89
Loss on sale of real estate -- --
-------- --------
$ 0.86 $ 0.89
======== ========
The Pro Forma Condensed Statement of Operations of the Trust gives effect
to the acquisition of the Acquired Properties as though they were acquired at
the beginning of the period presented.
(1) Reflects additional depreciation based on the book value of the depreciable
real estate purchased, as if the Acquired Properties were purchased at the
beginning of the period.
(2) Reflects additional interest expense on the Trust's revolving credit
facilities as if the Acquired Properties were purchased at the beginning of
the period.
(3) Reduction of administrative expense of prior owners of 150 Post Street
which is not comparable to future operations of the Trust.
(4) Reflects additional earnings attributable to minority interests, as if the
Acquired Properties were purchased at the beginning of the period.
25
Federal Realty Investment Trust
Pro Forma Condensed Statement of Operations
(unaudited)
Nine Months ended September 30, 1997
(in thousands, except per share data)
Trust Acquired Pro Forma Adjustments Proforma
Actual Properties Debit Credit Combined
Actual
Revenue
Rental income $137,090 $15,069 $152,159
Other income 7,512 57 7,569
Interest income 4,660 12 4,672
-------- ------- --------
149,262 15,138 164,400
Expenses
Interest 35,952 0 (2) 6,788 42,740
Depreciation and amortization 30,853 1,146 (1) 1,374 (3) 1,146 32,227
Administrative expenses 6,582 162 (3) 162 6,562
Operating expenses 45,598 4,898 50,496
-------- ------- --------
118,965 6,206 132,025
Income before investors share of operations
and gain on sale of real estate 30,297 8,932 32,375
Investors' share of operations (862) (4) (607) (1,489)
-------- ------- --------
Income before gain on sale of real estate 29,435 8,932 30,906
Gain on sale of real estate 6,375 6,375
-------- ------- --------
$ 35,810 $ 8,932 $ 37,281
======== ======= ========
Weighted average number of common shares 38,838 38,838
======== ========
Earnings per share
Income before gain on sale of real estate $ 0.76 $ 0.80
Gain on sale of real estate 0.16 0.16
-------- --------
$ 0.92 $ 0.96
======== ========
The Pro Forma Condensed Statement of Operations of the Trust gives effect
to the acquisition of the Acquired Properties as though they were acquired at
the beginning of the period presented.
(1) Reflects additional depreciation based on the book value of the depreciable
real estate purchased, as if the Acquired Properties were purchased at the
beginning of the period.
(2) Reflects additional interest expense on the Trust's revolving credit
facilities as if the Acquired Properties were purchased at the beginning of
the period.
(3) Reduction of depreciation and administrative expense of prior owners of 150
Post Street and Peninsula Center which is not comparable to future
operations of the Trust.
(4) Reflects additional earnings attributable to minority interests, as if the
Acquired Properties were purchased at the beginning of the period.
26
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the inclusion in this Form 8-K of our report dated March 14, 1997
on our audit of the statement of revenues and certain expenses of 150 Post
Street, San Francisco, California, for the year ending December 31, 1996. We
also consent to the incorporation by reference of said report in the
Registration Statements of Federal Realty Investment Trust on Form S-3 (File No.
33-15264, effective August 4, 1987; File No. 33-63687, effective November 6,
1995; and File No. 63955, effective November 3, 1995).
/s/ KPMG Peat Marwick L.L.P.
Chicago, Illinois
February 24, 1998
We consent to the inclusion in this Current Report on Form 8-K of our report
dated November 26, 1997, on our audit of the Statement of Revenues and Certain
Expenses of Fresh Meadows Commercial Property for the year ended December 31,
1996. We also consent to the incorporation by reference of said report in the
Registration Statements of Federal Realty Investment Trust on Form S-3 (File No.
33-15264, File No. 33-63687, and File No. 33-63955).
/s/ Coopers & Lybrand L.L.P.
Chicago, Illinois
February 23, 1998
We consent to the inclusion in this Form 8-K of our reports dated January 9,
1998 on our audits of the Statement of Revenue and Certain Expenses for the
Magruder Center, Rockville, Maryland, and the Statement of Revenue and Certain
Expenses for the Courthouse Center, Rockville, Maryland, respectively, for the
year ended December 31, 1996. We also consent to the incorporation by reference
of said reports in the Registration Statements of Federal Realty Investment
Trust on Form S-3 (File No. 33-15264, effective August 4, 1987; File No. 33-
63687, effective November 6, 1995; and File No. 63955, effective November 3,
1995).
/s/ Fangmeyer and Fangmeyer
Silver Spring, Maryland
February 24, 1998
We consent to the inclusion in this Form 8-K of our report dated January 22,
1998, on our audits of the Historical Summary of Gross Income and Direct
Operating Expenses of the Peninsula Shopping Center for the year ended December
31, 1996. We also consent to the incorporation by reference of said report in
the Registration Statements of Federal Realty Investment Trust on Form S-3 (File
No. 33-15264, effective August 4, 1987; File No. 33-63687, effective November 6,
1995; and File No. 63955, effective November 3, 1995).
/s/ Grant Thornton L.L.P.
Washington, DC
February 24, 1998
We consent to the incorporation by reference in the Registration Statement of
Federal Realty Investment Trust on Form S-3 (File No. 33-15264, effective August
4, 1987; File No. 33-63687, effective November 6, 1995; and File No. 63955,
effective November 3, 1995) of our report dated October 17, 1997 on our audit of
the statement of revenues and certain expenses of RREEF West-VI One, Inc.-Uptown
Shopping Center for the year ended December 31, 1996, which is included in this
Form 8-K of Federal Realty Investment Trust dated February 24, 1998.
/s/ DELOITTE & TOUCHE L.L.P.
Chicago, Illinois
February 24, 1998
27
