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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO THE SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 1-07533 
FEDERAL REALTY INVESTMENT TRUST
(Exact Name of Registrant as Specified in its Declaration of Trust) 
Maryland 52-0782497
(State of Organization) (IRS Employer Identification No.)
909 Rose Avenue, Suite 200, North Bethesda, Maryland 20852
(Address of Principal Executive Offices) (Zip Code)
(301) 998-8100
(Registrant’s Telephone Number, Including Area Code)


Title of Each ClassTrading SymbolName of Each Exchange On Which Registered
Common Shares of Beneficial InterestFRTNew York Stock Exchange
$.01 par value per share, with associated Common Share Purchase Rights
Depositary Shares, each representing 1/1000 of a share FRT-CNew York Stock Exchange
of 5.00% Series C Cumulative Redeemable Preferred Stock, $.01 par value per share
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      No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes      No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large Accelerated Filer
Accelerated filer
Non-Accelerated Filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by checkmark if the registrant has elected not use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).       Yes      No
The number of registrant’s common shares outstanding on April 30, 2021 was 77,755,460.


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FEDERAL REALTY INVESTMENT TRUST
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 2021

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020
Consolidated Statements of Comprehensive Income (unaudited) for the three months ended March 31, 2021 and 2020
Consolidated Statements of Shareholders' Equity (unaudited) for the three months ended March 31, 2021 and 2020
Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2021 and 2020
Notes to Consolidated Financial Statements (unaudited)
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.Quantitative and Qualitative Disclosures about Market Risk
Item 4.Controls and Procedures
PART II. OTHER INFORMATION
Item 1.Legal Proceedings
Item 1A.Risk Factors
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
Item 5.Other Information
Item 6.Exhibits
SIGNATURES


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Federal Realty Investment Trust
Consolidated Balance Sheets
March 31,December 31,
20212020
 (In thousands, except share and per share data)
(Unaudited)
ASSETS
Real estate, at cost
Operating (including $1,731,961 and $1,703,202 of consolidated variable interest entities, respectively)$7,840,664 $7,771,981 
Construction-in-progress (including $35,359 and $44,896 of consolidated variable interest entities, respectively)868,193 810,889 
8,708,857 8,582,870 
Less accumulated depreciation and amortization (including $347,041 and $335,735 of consolidated variable interest entities, respectively)(2,393,380)(2,357,692)
Net real estate6,315,477 6,225,178 
Cash and cash equivalents779,901 798,329 
Accounts and notes receivable, net161,249 159,780 
Mortgage notes receivable, net39,879 39,892 
Investment in partnerships12,148 22,128 
Operating lease right of use assets82,721 92,248 
Finance lease right of use assets50,795 51,116 
Prepaid expenses and other assets227,431 218,953 
TOTAL ASSETS$7,669,601 $7,607,624 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Mortgages payable, net (including $397,084 and $413,681 of consolidated variable interest entities, respectively)$466,950 $484,111 
Notes payable, net403,081 402,776 
Senior notes and debentures, net3,404,879 3,404,488 
Accounts payable and accrued expenses254,515 228,641 
Dividends payable84,872 83,839 
Security deposits payable20,867 20,388 
Operating lease liabilities63,023 72,441 
Finance lease liabilities72,045 72,049 
Other liabilities and deferred credits156,227 152,424 
Total liabilities4,926,459 4,921,157 
Commitments and contingencies (Note 6)
Redeemable noncontrolling interests138,182 137,720 
Shareholders’ equity
Preferred shares, authorized 15,000,000 shares, $.01 par:
5.0% Series C Cumulative Redeemable Preferred Shares, (stated at liquidation preference $25,000 per share), 6,000 shares issued and outstanding150,000 150,000 
5.417% Series 1 Cumulative Convertible Preferred Shares, (stated at liquidation preference $25 per share), 399,896 shares issued and outstanding9,997 9,997 
Common shares of beneficial interest, $.01 par, 100,000,000 shares authorized, 77,706,466 and 76,727,394 shares issued and outstanding, respectively781 771 
Additional paid-in capital3,386,917 3,297,305 
Accumulated dividends in excess of net income(1,024,417)(988,272)
Accumulated other comprehensive loss(2,300)(5,644)
Total shareholders’ equity of the Trust2,520,978 2,464,157 
Noncontrolling interests83,982 84,590 
Total shareholders’ equity2,604,960 2,548,747 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$7,669,601 $7,607,624 
The accompanying notes are an integral part of these consolidated statements.
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Federal Realty Investment Trust
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended March 31,
 20212020
 (In thousands, except per share data)
REVENUE
Rental income$217,135 $230,798 
Mortgage interest income1,026 759 
Total revenue218,161 231,557 
EXPENSES
Rental expenses49,238 44,312 
Real estate taxes29,420 29,064 
General and administrative10,258 10,251 
Depreciation and amortization63,874 62,188 
Total operating expenses152,790 145,815 
       Gain on sale of real estate and change in control of interest17,428  
OPERATING INCOME82,799 85,742 
OTHER INCOME/(EXPENSE)
Other interest income363 308 
Interest expense(32,085)(28,445)
Loss from partnerships(1,338)(1,164)
NET INCOME49,739 56,441 
Net income attributable to noncontrolling interests(1,503)(1,678)
NET INCOME ATTRIBUTABLE TO THE TRUST48,236 54,763 
Dividends on preferred shares(2,010)(2,010)
NET INCOME AVAILABLE FOR COMMON SHAREHOLDERS$46,226 $52,753 
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
       Net income available for common shareholders$0.60 $0.70 
Weighted average number of common shares76,842 75,360 
COMPREHENSIVE INCOME$53,433 $49,989 
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE TRUST$51,580 $48,311 

The accompanying notes are an integral part of these consolidated statements.
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Federal Realty Investment Trust
Consolidated Statements of Shareholders’ Equity
For the Three Months Ended March 31, 2021 and 2020
(Unaudited)
 Shareholders’ Equity of the Trust  
 Preferred SharesCommon SharesAdditional
Paid-in
Capital
Accumulated
Dividends in
Excess of Net
Income
Accumulated
Other
Comprehensive
Loss
Noncontrolling InterestsTotal Shareholders' Equity
 SharesAmountSharesAmount
 (In thousands, except share data)
BALANCE AT DECEMBER 31, 2020405,896 $159,997 76,727,394 $771 $3,297,305 $(988,272)$(5,644)$84,590 $2,548,747 
Net income, excluding $808 attributable to redeemable noncontrolling interests— — — — — 48,236 — 695 48,931 
Other comprehensive income - change in fair value of interest rate swaps, excluding $350 attributable to redeemable noncontrolling interest— — — — — — 3,344 — 3,344 
Dividends declared to common shareholders ($1.06 per share)— — — — — (82,371)— — (82,371)
Dividends declared to preferred shareholders— — — — — (2,010)— — (2,010)
Distributions declared to noncontrolling interests— — — — — — — (784)(784)
Common shares issued, net— — 847,493 8 87,206 — — — 87,214 
Shares issued under dividend reinvestment plan— — 6,280 — 545 — — — 545 
Share-based compensation expense, net of forfeitures— — 147,712 2 4,147 — — — 4,149 
Shares withheld for employee taxes— — (27,429)— (2,805)— — — (2,805)
Redemption of OP units— — 5,016  519 — — (519) 
BALANCE AT MARCH 31, 2021405,896 $159,997 77,706,466 $781 $3,386,917 $(1,024,417)$(2,300)$83,982 $2,604,960 
BALANCE AT DECEMBER 31, 2019405,896 $159,997 75,540,804 $759 $3,166,522 $(791,124)$(813)$100,791 $2,636,132 
January 1, 2020 adoption of new accounting standard— — — — — (510)— — (510)
Net income, excluding $1,015 attributable to redeemable noncontrolling interests— — — — — 54,763 — 663 55,426 
Other comprehensive income - change in fair value of interest rate swaps— — — — — — (6,452)— (6,452)
Dividends declared to common shareholders ($1.05 per share)— — — — — (79,403)— — (79,403)
Dividends declared to preferred shareholders— — — — — (2,010)— — (2,010)
Distributions declared to noncontrolling interests— — — — — — — (783)(783)
Common shares issued, net— — 13  2 — — — 2 
Shares issued under dividend reinvestment plan— — 3,834 — 446 — — — 446 
Share-based compensation expense, net of forfeitures— — 110,066 1 3,941 — — — 3,942 
Shares withheld for employee taxes— — (32,213)— (3,982)— — — (3,982)
Redemption of OP units— — — — (30)— — (3,290)(3,320)
Contributions from noncontrolling interests— — — — — — — 120 120 
BALANCE AT MARCH 31, 2020405,896 $159,997 75,622,504 $760 $3,166,899 $(818,284)$(7,265)$97,501 $2,599,608 
The accompanying notes are an integral part of these consolidated statements.
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Federal Realty Investment Trust
Consolidated Statements of Cash Flows
 (Unaudited)
Three Months Ended March 31,
 20212020
 (In thousands)
OPERATING ACTIVITIES
Net income$49,739 $56,441 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization63,874 62,188 
Gain on sale of real estate and change in control of interest(17,428) 
Loss from partnerships1,338 1,164 
Other, net1,245 (110)
Changes in assets and liabilities, net of effects of acquisitions and dispositions:
Decrease in accounts receivable, net883 3,012 
Decrease in prepaid expenses and other assets3,169 8,618 
Increase (decrease) in accounts payable and accrued expenses7,987 (3,619)
Increase (decrease) in security deposits and other liabilities4,299 (8,945)
Net cash provided by operating activities115,106 118,749 
INVESTING ACTIVITIES
Acquisition of real estate(5,694)(7,109)
Capital expenditures - development and redevelopment(68,527)(106,572)
Capital expenditures - other(15,189)(15,792)
Costs associated with property sold under threat of condemnation, net (17,412)
Proceeds from sale of real estate19,896  
Investment in partnerships(2,657)(136)
Distribution from partnerships in excess of earnings285 849 
Leasing costs(2,955)(5,001)
Increase in mortgage and other notes receivable, net (659)
Net cash used in investing activities(74,841)(151,832)
FINANCING ACTIVITIES
Net borrowings under revolving credit facility, including costs 990,000 
Repayment of mortgages, finance leases and notes payable(48,845)(1,524)
Issuance of common shares, net of costs87,329 19 
Dividends paid to common and preferred shareholders(82,913)(80,898)
Shares withheld for employee taxes(2,805)(3,982)
Distributions to and redemptions of noncontrolling interests(1,485)(4,720)
Net cash (used in) provided by financing activities(48,719)898,895 
(Decrease) increase in cash, cash equivalents and restricted cash(8,454)865,812 
Cash, cash equivalents, and restricted cash at beginning of year816,896 153,614 
Cash, cash equivalents, and restricted cash at end of period$808,442 $1,019,426 

The accompanying notes are an integral part of these consolidated statements.

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Federal Realty Investment Trust
Notes to Consolidated Financial Statements
March 31, 2021
(Unaudited)

NOTE 1—BUSINESS AND ORGANIZATION
Federal Realty Investment Trust (the “Trust”) is an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of retail and mixed-use properties. Our properties are located primarily in communities where we believe retail demand exceeds supply, in strategically selected metropolitan markets in the Mid-Atlantic and Northeast regions of the United States, California, and South Florida. As of March 31, 2021, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 101 predominantly retail real estate projects.
We operate in a manner intended to enable us to qualify as a REIT for federal income tax purposes. A REIT that distributes at least 90% of its taxable income to its shareholders each year and meets certain other conditions is not taxed on that portion of its taxable income which is distributed to its shareholders. Therefore, federal income taxes on our taxable income have been and are generally expected to be immaterial. We are obligated to pay state taxes, generally consisting of franchise or gross receipts taxes in certain states. Such state taxes also have not been material.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated balance sheet as of December 31, 2020, which has been derived from audited financial statements, and unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in our latest Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation for the periods presented have been included. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the full year.
Principles of Consolidation
Our consolidated financial statements include the accounts of the Trust, its corporate subsidiaries, and all entities in which the Trust has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). The equity interests of other investors are reflected as noncontrolling interests or redeemable noncontrolling interests. All significant intercompany transactions and balances are eliminated in consolidation. We account for our interests in joint ventures, which we do not control, using the equity method of accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, referred to as “GAAP,” requires management to make estimates and assumptions that in certain circumstances affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and revenues and expenses. These estimates are prepared using management’s best judgment, after considering past, current and expected events and economic conditions. Actual results could differ from these estimates.
Impacts of COVID-19 Pandemic
Since March 2020, we have been, and continue to be, impacted by the novel coronavirus ("COVID-19") pandemic. While we currently expect the impact to our properties to be temporary in nature, the extent of the future effects of COVID-19 on our business, results of operations, cash flows, and growth prospects is highly uncertain and will ultimately depend on future developments, none of which can be predicted with any certainty.
Federal, state, and local governments have taken various actions since the onset of the pandemic to mitigate the spread of COVID-19. These actions range from closure of nonessential businesses and ordering residents to generally stay at home at the onset of the pandemic to phased re-openings and capacity limitations as COVID-19 vaccines are rolled out and infection rates start to decline. These actions, along with general concern over the spread of COVID-19, required a significant number of tenants to close their operations or to significantly limit the amount of business they are able to conduct. These closures and
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restrictions have impacted the tenants' ability to timely pay rent as required under our leases and also caused many tenants to close their businesses permanently. As a result, we continued to see elevated levels of collectibility related impacts and accordingly, during the three months ended March 31, 2021, we recognized collectibility related adjustments of $14.8 million. This includes not only the impact of tenants recognized on a cash basis but also changes in our collectibility assessments from probable to not probable, disputed rents, and any rent abatements directly related to COVID-19. As of March 31, 2021, the revenue from approximately 34% of our tenants (based on total commercial leases) is being recognized on a cash basis.
For more information, See Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Outlook.
Forward Equity Sales
On February 24, 2021, we replaced our existing at-the-market (“ATM”) equity program with a new ATM equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $500.0 million. The new ATM equity program also allows shares to be sold through forward sales agreements. Our forward sales contracts currently meet all the conditions for equity classification; and therefore, we record common stock on the settlement date at the purchase price contemplated by the contract. Furthermore, we consider the potential dilution resulting from forward sales agreements on our earnings per share calculations. We use the treasury method to determine the dilution, if any, from the forward sale agreement during the period of time prior to settlement. As of March 31, 2021, no forward sales contracts have settled.
Recently Issued Accounting Pronouncements
StandardDescriptionEffect on the financial statements or significant matters
ASU 2020-04, March 2020, Reference Rate Reform (Topic 848)
This ASU provides companies with optional practical expedients to ease the accounting burden for contract modifications associated with transitioning away from LIBOR and other interbank offered rates that are expected to be discontinued as part of reference rate reform. For hedges, the guidance generally allows changes to the reference rate and other critical terms without having to de-designate the hedging relationship, as well as allows the shortcut method to continue to be applied. For contract modifications, changes in the reference rate or other critical terms will be treated as a continuation of the prior contract.

This guidance can be applied immediately, however, is generally only available through December 31, 2022.
We are still evaluating the impact of reference rate reform and whether we will apply any of these practical expedients.
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Consolidated Statements of Cash Flows—Supplemental Disclosures
The following tables provide supplemental disclosures related to the Consolidated Statements of Cash Flows:
Three Months Ended
 March 31,
 20212020
 (In thousands)
SUPPLEMENTAL DISCLOSURES:
Total interest costs incurred$38,626 $34,159 
Interest capitalized(6,541)(5,714)
Interest expense$32,085 $28,445 
Cash paid for interest, net of amounts capitalized$29,973 $29,405 
Cash paid for income taxes$ $4 
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
DownREIT operating partnership units issued with acquisition$ $18,920 
Mortgage loans assumed with acquisition$ $8,903 
DownREIT operating partnership units redeemed for common shares$519 $ 
Shares issued under dividend reinvestment plan$430 $429 
 March 31,December 31,
20212020
 (In thousands)
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
Cash and cash equivalents$779,901 $798,329 
Restricted cash (1)28,541 18,567 
Total cash, cash equivalents, and restricted cash$808,442 $816,896 
(1)Restricted cash balances are included in "prepaid expenses and other assets" on our consolidated balance sheets.

NOTE 3—REAL ESTATE
On January 4, 2021, we acquired our partner's 20% interest in our joint venture arrangement related to the Pike & Rose hotel for $2.3 million, and repaid the $31.5 million mortgage loan encumbering the hotel. As a result of the transaction, we gained control of the hotel, and effective January 4, 2021, we have consolidated this asset. We also recognized a gain on acquisition of the controlling interest of $2.1 million related to the difference between the carrying value and fair value of the previously held equity interest.
On February 22, 2021, we acquired the fee interest at our Mount Vernon Plaza property in Alexandria, Virginia for $5.6 million. As a result of this transaction, the "operating lease right of use assets" and "operating lease liabilities" on our consolidated balance sheet decreased by $9.8 million. We now own the entire fee interest on this property.
On March 19, 2021, we sold a portion of Graham Park Plaza in Falls Church, Virginia for $20.3 million, resulting in a gain on sale of $15.6 million.

NOTE 4—DEBT
On February 5, 2021, we repaid the $16.2 million mortgage loan on Sylmar Towne Center, at par, prior to its original maturity date.
During the three months ended March 31, 2021, there were no borrowings on our $1.0 billion revolving credit facility. Our revolving credit facility, term loan, and certain notes require us to comply with various financial covenants, including the maintenance of minimum shareholders' equity and debt coverage ratios and a maximum ratio of debt to net worth. As of March 31, 2021, we were in compliance with all default related debt covenants.

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NOTE 5—FAIR VALUE OF FINANCIAL INSTRUMENTS
Except as disclosed below, the carrying amount of our financial instruments approximates their fair value. The fair value of our mortgages payable, notes payable and senior notes and debentures is sensitive to fluctuations in interest rates. Quoted market prices (Level 1) were used to estimate the fair value of our marketable senior notes and debentures and discounted cash flow analysis (Level 2) is generally used to estimate the fair value of our mortgages and notes payable. Considerable judgment is necessary to estimate the fair value of financial instruments. The estimates of fair value presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. A summary of the carrying amount and fair value of our mortgages payable, notes payable and senior notes and debentures is as follows:

 March 31, 2021December 31, 2020
Carrying
Value
Fair ValueCarrying
Value
Fair Value
(In thousands)
Mortgages and notes payable$870,031 $864,353 $886,887 $879,390 
Senior notes and debentures$3,404,879 $3,630,425 $3,404,488 $3,761,465 

As of March 31, 2021, we have two interest rate swap agreements with notional amounts of $56.5 million that are measured at fair value on a recurring basis. The interest rate swap agreements fix the interest rate on $56.5 million of mortgage payables at 3.67% through December 15, 2029. The fair values of the interest rate swap agreements are based on the estimated amounts we would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and interest rate related observable inputs. The fair value of our swaps at March 31, 2021 was a liability of $1.2 million and is included in "other liabilities and deferred credits" on our consolidated balance sheet. For the three months ended March 31, 2021, the value of our interest rate swaps increased $3.5 million (including $0.2 million reclassified from other comprehensive income to interest expense). A summary of our financial liabilities that are measured at fair value on a recurring basis, by level within the fair value hierarchy is as follows:
March 31, 2021December 31, 2020
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
(In thousands)
Interest rate swaps$ $(1,210)$ $(1,210)$ $(4,711)$ $(4,711)
One of our equity method investees has two interest rate swaps which qualify for cash flow hedge accounting. For the three months ended March 31, 2021, our share of the change in fair value of the related swaps included in "accumulated other comprehensive income" was an increase of $0.2 million.

NOTE 6—COMMITMENTS AND CONTINGENCIES
We are sometimes involved in lawsuits, warranty claims, and environmental matters arising in the ordinary course of business. Management makes assumptions and estimates concerning the likelihood and amount of any potential loss relating to these matters.
We are currently a party to various legal proceedings. We accrue a liability for litigation if an unfavorable outcome is probable and the amount of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, we accrue the best estimate within the range; however, if no amount within the range is a better estimate than any other amount, the minimum within the range is accrued. Legal fees related to litigation are expensed as incurred. We do not believe that the ultimate outcome of these matters, either individually or in the aggregate, could have a material adverse effect on our financial position or overall trends in results of operations; however, litigation is subject to inherent uncertainties. Also under our leases, tenants are typically obligated to indemnify us from and against all liabilities, costs and expenses imposed upon or asserted against us (1) as owner of the properties due to certain matters relating to the operation of the properties by the tenant, and (2) where appropriate, due to certain matters relating to the ownership of the properties prior to their acquisition by us.
Under the terms of certain partnership agreements, the partners have the right to exchange their operating partnership units for cash or common shares, at our option. A total of 739,601 downREIT operating partnership units are outstanding which have a total fair value of approximately $75.0 million, which is calculated by multiplying the outstanding number of downREIT partnership units by our closing stock price on March 31, 2021.

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NOTE 7—SHAREHOLDERS’ EQUITY
The following table provides a summary of dividends declared and paid per share:

 Three Months Ended March 31,
 20212020
 DeclaredPaidDeclaredPaid
Common shares$1.060 $1.060 $1.050 $1.050 
5.417% Series 1 Cumulative Convertible Preferred shares$0.339 $0.339 $0.339 $0.339 
5.0% Series C Cumulative Redeemable Preferred shares (1)$0.313 $0.313 $0.313 $0.313 
(1)Amount represents dividends per depository share, each representing 1/1000th of a share.

On February 24, 2021, we replaced our existing ATM equity program with a new ATM equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $500.0 million. The new ATM equity program also allows shares to be sold through forward sales agreements. We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay indebtedness and/or for general corporate purposes.
For the three months ended March 31, 2021, we issued 847,471 common shares at a weighted average price per share of $104.19 for net cash proceeds of $87.2 million including paying $0.9 million in commissions and $0.2 million in additional offering expenses related to the sales of these common shares. We also entered into forward sales agreements for 331,318 shares under our ATM equity program at an average initial offering price of $106.43, which is net of approximately $0.4 million of commissions. The forward price that we will receive upon physical settlement of the agreements is subject to the adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchasers' stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreements. The open forward shares may be settled at any time on or before multiple required settlement dates in March 2022. We have remaining capacity to issue up to $404.4 million in common shares under our ATM equity program as of March 31, 2021.

NOTE 8—SHARE-BASED COMPENSATION PLANS
A summary of share-based compensation expense included in net income is as follows:
Three Months Ended
 March 31,
 20212020
 (In thousands)
Grants of common shares, restricted stock units, and options$4,149 $3,942 
Capitalized share-based compensation(398)(332)
Share-based compensation expense$3,751 $3,610 

NOTE 9—EARNINGS PER SHARE
We have calculated earnings per share (“EPS”) under the two-class method. The two-class method is an earnings allocation methodology whereby EPS for each class of common stock and participating securities is calculated according to dividends declared and participation rights in undistributed earnings. For the three months ended March 31, 2021 and 2020, we had 0.3 million and 0.2 million weighted average unvested shares outstanding, respectively, which are considered participating securities. Therefore, we have allocated our earnings for basic and diluted EPS between common shares and unvested shares; the portion of earnings allocated to the unvested shares is reflected as “earnings allocated to unvested shares” in the reconciliation below.
The following potentially issuable shares were excluded from the diluted EPS calculation because their impact is anti-dilutive:
exercise of 2,363 and 682 stock options for the three months ended March 31, 2021 and 2020, respectively,
conversions of downREIT operating partnership units and 5.417% Series 1 Cumulative Convertible Preferred Shares for all periods presented, and
The issuance of 331,318 shares issuable under forward sales agreements for the three months ended March 31, 2021.
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Additionally, 10,441 of unvested restricted stock units are excluded from the diluted EPS calculation as the market based performance criteria in the awards has not yet been achieved.
Three Months Ended
March 31,
 20212020
 (In thousands, except per share data)
NUMERATOR
Net income$49,739 $56,441 
Less: Preferred share dividends(2,010)(2,010)
Less: Income from operations attributable to noncontrolling interests(1,503)(1,678)
Less: Earnings allocated to unvested shares(294)(247)
Net income available for common shareholders, basic and diluted$45,932 $52,506 
DENOMINATOR
Weighted average common shares outstanding, basic and diluted76,842 75,360 
EARNINGS PER COMMON SHARE, BASIC AND DILUTED:
Net income available for common shareholders$0.60 $0.70 


NOTE 10—SUBSEQUENT EVENT
On April 16, 2021, we repaid $100.0 million of our existing $400.0 million term loan, amended the agreement on the remaining $300.0 million to lower the current spread over LIBOR from 135 basis points to 80 basis points based on our current credit rating, and extended the maturity date to April 16, 2024, along with two one-year extensions, at our option.

On April 30, 2021, we acquired the fee interest in a 90,000 square foot, shopping center in McLean, Virginia for $32.1 million. The acquisition was completed through a newly formed joint venture, in which we own an 80% controlling interest.
ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following discussion should be read in conjunction with the consolidated interim financial statements and notes thereto appearing in Item 1 of this report and the more detailed information contained in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) on February 11, 2021.
Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of Federal Realty Investment Trust (“we” “our” or “us”) and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,” “intends,” “should” or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.
The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:
risks that our tenants will not pay rent, may vacate early or may file for bankruptcy or that we may be unable to renew leases or re-let space at favorable rents as leases expire;
risks that we may not be able to proceed with or obtain necessary approvals for any redevelopment or renovation project, and that completion of anticipated or ongoing property redevelopment or renovation projects that we do pursue may cost more, take more time to complete or fail to perform as expected;
risk that we are investing a significant amount in ground-up development projects that may be dependent on third parties to deliver critical aspects of certain projects, requires spending a substantial amount upfront in infrastructure, and assumes receipt of public funding which has been committed but not entirely funded;
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risks normally associated with the real estate industry, including risks that occupancy levels at our properties and the amount of rent that we receive from our properties may be lower than expected, that new acquisitions may fail to perform as expected, that competition for acquisitions could result in increased prices for acquisitions, that costs associated with the periodic maintenance and repair or renovation of space, insurance and other operations may increase, that environmental issues may develop at our properties and result in unanticipated costs, and, because real estate is illiquid, that we may not be able to sell properties when appropriate;
risks that our growth will be limited if we cannot obtain additional capital;
risks of financing on terms which are acceptable to us, our ability to meet existing financial covenants and the limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would result in increased interest expense;
risks related to our status as a real estate investment trust, commonly referred to as a REIT, for federal income tax purposes, such as the existence of complex tax regulations relating to our status as a REIT, the effect of future changes in REIT requirements as a result of new legislation, and the adverse consequences of the failure to qualify as a REIT;
risks related to natural disasters, climate change and public health crises (such as the outbreak and worldwide spread of COVID-19), and the measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address them, may precipitate or materially exacerbate one or more of the above-mentioned risks, and may significantly disrupt or prevent us from operating our business in the ordinary course for an extended period.
Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this Quarterly Report on Form 10-Q. You should carefully review the risks and the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2020 and under Part II, Item 1A in this Quarterly Report on Form 10-Q, before making any investments in us.
Overview
We are an equity real estate investment trust (“REIT”) specializing in the ownership, management, and redevelopment of high quality retail and mixed-use properties located primarily in communities where we believe retail demand exceeds supply, in strategically selected metropolitan markets in the Northeast and Mid-Atlantic regions of the United States, California, and South Florida. As of March 31, 2021, we owned or had a majority interest in community and neighborhood shopping centers and mixed-use properties which are operated as 101 predominantly retail real estate projects comprising approximately 23.3 million square feet. In total, the real estate projects were 91.8% leased and 89.5% occupied at March 31, 2021.
Impacts of COVID-19 Pandemic
We continue to monitor and address risks related to the novel coronavirus disease ("COVID-19") pandemic. Since March 2020 when the World Health Organization characterized COVID-19 as a global pandemic, we have been and continue to be impacted by COVID-19 and the actions taken by federal, state, and local government to prevent its spread. These actions range from closure of nonessential businesses and ordering residents to generally stay at home at the onset of the pandemic to phased re-openings and capacity limitations as COVID-19 vaccines are rolled out and infection rates start to decline. These actions, along with general concern over the spread of COVID-19, required a significant number of tenants to close their operations or to significantly limit the amount of business they are able to conduct. These closures and restrictions have impacted the tenants' ability to timely pay rent as required under our leases and also caused many tenants to close their business permanently. As a result, our cash flow and results of operations in the three months ended March 31, 2021 continued to be materially adversely impacted, with vacancy levels remaining above historical levels. Although virtually all of our leases required the tenants to pay rent even while they were not operating, we entered into numerous agreements to abate, defer, and/or restructure tenant rent payments for varying periods of time, all with the objective of collecting as much cash as reasonably possible and maintaining occupancy to the maximum extent. We believe those actions will position many of our tenants to be able to return to payment of contractual rent as soon as possible after the impacts from the pandemic have subsided.
During the three months ended March 31, 2021, we recognized collectibility related adjustments of $14.8 million. This includes not only the impact of tenants recognized on a cash basis but also changes in our collectibility assessments from probable to not probable, disputed rents, and any rent abatements directly related to COVID-19. As of March 31, 2021, the revenue from approximately 34% of our tenants (based on total commercial leases) is being recognized on a cash basis.
We believe that the actions we have taken to improve our financial position and maximize our liquidity, as described further in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report on Form 10-K, will continue to mitigate the impact to our cash flow caused by tenants not timely paying contractual rent.
See further discussion of the impact of COVID-19 on our business throughout Item 2.

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Business Continuity
We transitioned our entire workforce to remote work in March 2020 with the exception of those employees who were critical to providing the necessary day-to-day property management functions required to keep our properties open and operating for essential businesses such as grocery stores and drug stores, and a few employees who were needed to carry out critical corporate functions. Although all of our corporate offices have reopened with capacity limitations, approximately 25% of our workforce continues to work remotely on a regular basis. We have not laid off, furloughed, or terminated any employees nor have we modified the compensation of any of our employees as a result of COVID-19, and the transition to a largely remote workforce has not had any material adverse impacts on our financial reporting systems, our internal controls, or disclosure controls and procedures.
Critical Accounting Policies
There have been no significant changes to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2020 Annual Report on Form 10-K.
2021 Acquisitions and Disposition
On January 4, 2021, we acquired our partner's 20% interest in our joint venture arrangement related to the Pike & Rose hotel for $2.3 million, and repaid the $31.5 million mortgage loan encumbering the hotel. As a result of the transaction, we gained control of the hotel, and effective January 4, 2021, we have consolidated the asset. We also recognized a gain on acquisition of the controlling interest of $2.1 million related to the difference between the carrying value and fair value of the previously held equity interest.
On February 22, 2021, we acquired the fee interest on Mount Vernon Plaza for $5.6 million. As a result of this transaction, the "operating lease right of use assets" and "operating lease liabilities" on our consolidated balance sheet decreased by $9.8 million. We now own the entire fee interest on this property.
On March 19, 2021, we sold a portion of Graham Park Plaza in Falls Church, Virginia for $20.3 million, resulting in a gain on sale of $15.6 million.
On April 30, 2021, we acquired the fee interest in a 90,000 square foot, shopping center in McLean, Virginia for $32.1 million. The acquisition was completed through a newly formed joint venture, in which we own an 80% controlling interest.
2021 Debt and Equity Transactions
On February 5, 2021, we repaid the $16.2 million mortgage loan on Sylmar Towne Center, at par, prior to its original maturity date.
On February 24, 2021, we replaced our existing at-the-market (“ATM”) equity program with a new ATM equity program in which we may from time to time offer and sell common shares having an aggregate offering price of up to $500.0 million. The new ATM equity program also allows shares to be sold through forward sales agreements. We intend to use the net proceeds to fund potential acquisition opportunities, fund our development and redevelopment pipeline, repay indebtedness and/or for general corporate purposes.
For the three months ended March 31, 2021, we issued 847,471 common shares at a weighted average price per share of $104.19 for net cash proceeds of $87.2 million including paying $0.9 million in commissions and $0.2 million in additional offering expenses related to the sales of these common shares. We also entered into forward sales agreements for 331,318 shares under our ATM equity program at an average initial offering price of $106.43, which is net of approximately $0.4 million of commissions. The forward price that we will receive upon physical settlement of the agreements is subject to the adjustment for (i) a floating interest rate factor equal to a specified daily rate less a spread, (ii) the forward purchasers' stock borrowing costs and (iii) scheduled dividends during the term of the forward sale agreements. The open forward shares may be settled at any time on or before multiple required settlement dates in March 2022. We have remaining capacity to issue up to $404.4 million in common shares under our ATM equity program as of March 31, 2021.
On April 16, 2021, we repaid $100.0 million of our existing $400.0 million term loan, amended the agreement on the remaining $300.0 million to lower the current spread over LIBOR from 135 basis points to 80 basis points based on our current credit rating, and extended the maturity date to April 16, 2024, along with two one-year extensions, at our option.
Recently Issued Accounting Pronouncements
See Note 2 to the consolidated financial statements.
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Capitalized Costs
Certain external and internal costs directly related to the development, redevelopment and leasing of real estate, including pre-construction costs, real estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved, are capitalized. We capitalized certain external and internal costs related to both development and redevelopment activities of $82 million and $2 million, respectively, for the three months ended March 31, 2021, and $114 million and $3 million, respectively, for the three months ended March 31, 2020. We capitalized external and internal costs related to other property improvements of $16 million and $1 million, respectively, for the three months ended March 31, 2021, and $13 million and $1 million for the three months ended March 31, 2020. We capitalized external and internal costs related to leasing activities of $2 million and $1 million, respectively, for the three months ended March 31, 2021, and $3 million and $1 million, respectively, for the three months ended March 31, 2020. The amount of capitalized internal costs for salaries and related benefits for development and redevelopment activities, other property improvements, and leasing activities were $2 million, $1 million, and $1 million, respectively, for the three months ended March 31, 2021 and $3 million, $1 million, and $1 million, respectively for the three months ended March 31, 2020. Total capitalized costs were $104 million and $134 million for the three months ended March 31, 2021 and 2020, respectively.
Outlook
Our long-term growth strategy is focused on growth in earnings, funds from operations, and cash flows primarily through a combination of the following:
growth in our comparable property portfolio,
growth in our portfolio from property developments and redevelopments, and
expansion of our portfolio through property acquisitions.

While the ongoing COVID-19 pandemic is impacting us in the short-term, our long-term focus has not changed. See our 10-K filed on February 11, 2021, for discussion of our long-term strategies.

Since March 2020, federal, state, and local governments have taken various actions to mitigate the spread of COVID-19. This includes initially ordering closures of non-essential businesses and ordering residents to generally stay at home, and subsequent phased re-openings, as well as the general concern over the spread of COVID-19, have required a significant number of tenants to close their operations or to significantly limit the amount of business they are able to conduct in their stores. These closures and restrictions have impacted the tenants' ability to timely pay rent as required under our leases and also caused many tenants to close their business permanently. While approximately 98% of our retail tenants were open at March 31, 2021, many continue to have both operating and capacity restrictions in place as mandated by local governments. These economic hardships have adversely impacted our business, and continue to have a negative effect on our financial results during the first quarter of 2021. With very few exceptions, our leases require tenants to continue to pay rent even while closed as a result of the pandemic, and while many tenants did not pay rents and other charges during a portion of 2020, the majority of our tenants have resumed paying all or a portion of their rent and/or other charges as their businesses were able to reopen. Our percentage of contractual rent actually collected has continued to increase since the low point in April 2020, including some tenants paying past due amounts. As of March 31, 2021, we have entered into agreements with approximately 32% of our tenants (based on total commercial leases) to defer rent payments to later periods, largely throughout the remainder of 2021, although some extend beyond, and negotiations with other tenants are still ongoing. While increasing monthly cash collection rates is a positive trend driven by government mandated restrictions gradually being lifted, we expect that our rent collections will continue to be below our tenants’ contractual rent obligations and historical levels, which will continue to adversely impact our results of operations. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted. Depending upon the duration of tenant closures, operating restrictions, and the overall economic downturn resulting from COVID-19, we may find that even deferred rents are difficult to collect, and we may experience higher vacancy levels. While the duration and severity of the economic impact resulting from COVID-19 is unknown, we seek to position the Trust to participate in the resulting economic recovery.

We continue to have several development projects in process being delivered as follows:
The first phase of construction on Santana West includes an eight story 376,000 square foot office building, with over 1,700 parking spaces. The building is expected to cost between $250 million and $270 million with openings expected to begin in 2022.
Phase III of Assembly Row includes 277,000 square feet of office space (of which, 150,000 square feet is pre-leased), 56,000 square feet of retail space, 500 residential units, and over 800 additional parking spaces. The expected costs for Phase III are between $465 million and $485 million and is projected to open beginning in the second quarter of 2021.
Phase III at Pike & Rose includes a 212,000 square foot office building (which includes 7,000 square feet of ground floor retail space) and over 600 additional parking spaces. The building is expected to cost between $128 million and
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$135 million. At March 31, 2021, approximately138,000 square feet has been leased, of which approximately 45,000 square feet is our new corporate headquarters.
Throughout the portfolio, we currently have redevelopment projects underway with a projected total cost of approximately $323 million that we expect to stabilize over the next several years.

The above includes our best estimates based on information currently known, however, the completion of construction, final costs, and the timing of leasing and openings will be dependent upon the duration of governmental restrictions and the duration and severity of the economic impacts of COVID-19.
The development of future phases of Assembly Row, Pike & Rose and Santana Row will be pursued opportunistically based on, among other things, market conditions, tenant demand, and our evaluation of whether those phases will generate an appropriate financial return.
We continue to review acquisition opportunities that complement our portfolio and provide long-term growth opportunities. Initially, some of our acquisitions do not contribute significantly to earnings growth; however, we believe they provide long-term re-leasing growth, redevelopment opportunities, and other strategic opportunities. Any growth from acquisitions is contingent on our ability to find properties that meet our qualitative standards at prices that meet our financial hurdles. Changes in interest rates may affect our success in achieving earnings growth through acquisitions by affecting both the price that must be paid to acquire a property, as well as our ability to economically finance the property acquisition. Generally, our acquisitions are initially financed by available cash and/or borrowings under our revolving credit facility which may be repaid later with funds raised through the issuance of new equity or new long-term debt. We may also finance our acquisitions through the issuance of common shares, preferred shares, or downREIT units as well as through assumed mortgages and property sales.
At March 31, 2021, the leasable square feet in our properties was 91.8% leased and 89.5% occupied. The leased rate is higher than the occupied rate due to leased spaces that are being redeveloped or improved or that are awaiting permits and, therefore, are not yet ready to be occupied. Our occupancy and leased rates are subject to variability over time due to factors including acquisitions, the timing of the start and stabilization of our redevelopment projects, lease expirations and tenant closings and bankruptcies.
Lease Rollovers
For the first quarter of 2021, we signed leases for a total of 515,000 square feet of retail space including 506,000 square feet of comparable space leases (leases for which there was a prior tenant) at an average rental increase of 9% on a cash basis. New leases for comparable spaces were signed for 220,000 square feet at an average rental increase of 18% on a cash basis. Renewals for comparable spaces were signed for 286,000 square feet at an average rental increase of 2% on a cash basis. Tenant improvements and incentives for comparable spaces were $32.06 per square foot, of which, $67.15 per square foot was for new leases and $5.09 per square foot was for renewals for the three months ended March 31, 2021.
The rental increases associated with comparable spaces generally include all leases signed for retail space in arms-length transactions reflecting market leverage between landlords and tenants during the period. The comparison between average rent for expiring leases and new leases is determined by including contractual rent on the expiring lease and annual market rent and in some instances, projections of percentage rent, to be paid on the new lease. In atypical circumstances, management may exercise judgment as to how to most effectively reflect the comparability of spaces reported in this calculation. As a result of accommodations made to certain tenants to help them to stay open during and after the COVID-19 pandemic, we have found it necessary to exercise more judgement in 2020 and 2021 than in prior years in order to appropriately reflect the comparability of spaces in the calculation. The change in rental income on comparable space leases is impacted by numerous factors including current market rates, location, individual tenant creditworthiness, use of space, market conditions when the expiring lease was signed, capital investment made in the space and the specific lease structure. Tenant improvements and incentives include the total dollars committed for the improvement (fit out) of a space as it relates to a specific lease. Incentives include amounts paid to tenants as inducement to sign a lease that do not represent building improvements.
Historically, we have executed comparable space leases for 1.3 to 1.9 million square feet of retail space each year. We expect some rental rates to continue to be negatively impacted by the COVID-19 pandemic. We expect the volume for 2021 to be in line with, or potentially exceed our historical averages given a larger amount of vacancy as a result of COVID-19. Although we expect overall positive increases in annual rent for comparable spaces, changes in annual rent for any individual lease or combinations of individual leases reported in any particular period may be positive or negative and we can provide no assurance that the annual rents on comparable space leases will continue to increase at historical levels, if at all.
The leases signed in 2021 generally become effective over the following two years though some may not become effective until 2024 and beyond. Further, there is risk that some new tenants will not ultimately take possession of their space and that tenants for both new and renewal leases may not pay all of their contractual rent due to operating, financing or other matters. However,
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our historical increases in rental rates do provide information about the tenant/landlord relationship and the potential increase we may achieve in rental income over time.
Comparable Properties
Throughout this section, we have provided certain information on a “comparable property” basis. Information provided on a comparable property basis includes the results of properties that we owned and operated for the entirety of both periods being compared except for properties that are currently under development or are being repositioned for significant redevelopment and investment. For the three months ended March 31, 2021, all or a portion of 98 properties were considered comparable properties and six properties were considered non-comparable properties. For the three months ended March 31, 2021, two portions of properties were moved from non-comparable properties to comparable properties, one property and two portions of properties were moved from acquisitions to comparable properties, and one portion of a property was removed from non-comparable properties, as it was sold, compared to the designations as of December 31, 2020. While there is judgment surrounding changes in designations, we typically move non-comparable properties to comparable properties once they have stabilized, which is typically considered 90% physical occupancy or when the growth expected from the redevelopment has been included in the comparable periods. We typically remove properties from comparable properties when the repositioning of the asset has commenced and has or is expected to have a significant impact to property operating income within the calendar year. Acquisitions are moved to comparable properties once we have owned the property for the entirety of comparable periods and the property is not under development or being repositioned for significant redevelopment and investment.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2021 AND 2020
   Change
 20212020Dollars%
 (Dollar amounts in thousands)
Rental income$217,135 $230,798 $(13,663)(5.9)%
Mortgage interest income1,026 759 267 35.2 %
Total property revenue218,161 231,557 (13,396)(5.8)%
Rental expenses49,238 44,312 4,926 11.1 %
Real estate taxes29,420 29,064 356 1.2 %
Total property expenses78,658 73,376 5,282 7.2 %
Property operating income (1)139,503 158,181 (18,678)(11.8)%
General and administrative expense(10,258)(10,251)(7)0.1 %
Depreciation and amortization(63,874)(62,188)(1,686)2.7 %
Gain on sale of real estate and change in control of interest17,428 — 17,428 100.0 %
Operating income82,799 85,742 (2,943)(3.4)%
Other interest income363 308 55 17.9 %
Interest expense(32,085)(28,445)(3,640)12.8 %
Loss from partnerships(1,338)(1,164)(174)14.9 %
Total other, net(33,060)(29,301)(3,759)12.8 %
Net income49,739 56,441 (6,702)(11.9)%
Net income attributable to noncontrolling interests(1,503)(1,678)175 (10.4)%
Net income attributable to the Trust$48,236 $54,763 $(6,527)(11.9)%
(1)Property operating income is a non-GAAP measure that consists of rental income and mortgage interest income, less rental expenses and real estate taxes. This measure is used internally to evaluate the performance of property operations and we consider it to be a significant measure. Property operating income should not be considered an alternative measure of operating results or cash flow from operations as determined in accordance with GAAP.
Property Revenues
Total property revenue decreased $13.4 million, or 5.8%, to $218.2 million in the three months ended March 31, 2021 compared to $231.6 million in the three months ended March 31, 2020. The percentage occupied at our shopping centers was 89.5% at March 31, 2021 compared to 91.5% at March 31, 2020. The most significant driver of the decrease in property revenues is the ongoing impact of COVID-19, as many of our tenants were forced to temporarily or in some cases permanently
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close their businesses in addition to adhering to government imposed capacity limitations and restrictions resulting in changes in our collectibility estimates and in some cases rent abatement. Changes in the components of property revenue are discussed below.
Rental Income
Rental income consists primarily of minimum rent, cost reimbursements from tenants and percentage rent, and is net of collectibility related adjustments. Rental income decreased $13.7 million, or 5.9%, to $217.1 million in the three months ended March 31, 2021 compared to $230.8 million in the three months ended March 31, 2020 due primarily to the following:
higher collectibility related impacts including rent abatements across all properties of $11.8 million primarily the result of COVID-19 impacts,
a decrease of $4.7 million from 2020 property sales, and
a decrease of $1.9 million from comparable properties primarily related to lower average occupancy of approximately $6.7 million and lower parking income and percentage rent of $1.5 million primarily due to the impacts from COVID-19 related closures and restrictions, partially offset by higher rental rates of approximately $2.8 million and higher recoveries of $2.4 million primarily the result of higher snow removal expense,
partially offset by,
an increase of $4.0 million from non-comparable properties primarily driven by the opening of our new office building at Santana Row in early 2020 and redevelopment related occupancy increases at one of our properties, and
an increase of $0.7 million from acquisitions.
Mortgage interest income
Mortgage interest income increased $0.3 million, or 35.2%, to $1.0 million in the three months ended March 31, 2021 compared to $0.8 million in the three months ended March 31, 2020. This increase is due primarily to the acquisition of two mortgage loans secured by a shopping center in Rockville, Maryland that is owned by a third party, in September 2020.
Property Expenses
Total property expenses increased $5.3 million, or 7.2%, to $78.7 million in the three months ended March 31, 2021 compared to $73.4 million in the three months ended March 31, 2020. Changes in the components of property expenses are discussed below.
Rental Expenses
Rental expenses increased $4.9 million, or 11.1%, to $49.2 million in the three months ended March 31, 2021 compared to $44.3 million in the three months ended March 31, 2020. This decrease is primarily due to the following:
an increase of $5.7 million from comparable properties due primarily to higher snow removal expense,
an increase of $0.8 million from acquisitions, and
an increase of $0.5 million from non-comparable properties driven by the opening of our new office buildings at Santana Row and Pike & Rose in 2020,
partially offset by,
a decrease of $1.6 million from 2020 property sales.
As a result of the changes in rental income and rental expenses as discussed above, rental expenses as a percentage of rental income increased to 22.7% in the three months ended March 31, 2021 from 19.2% in the three months ended March 31, 2020.
Real Estate Taxes
Real estate tax expense increased $0.4 million, or 1.2%, to $29.4 million in the three months ended March 31, 2021 compared to $29.1 million in the three months ended March 31, 2020. This increase is primarily due the following:
an increase of $0.5 million from non-comparable properties due primarily to the opening of our new office building at Santana Row in early 2020, and
an increase of $0.4 million from comparable properties primarily due to higher assessments,
partially offset by,
a decrease of $0.7 million from 2020 property sales.
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Property Operating Income
Property operating income decreased $18.7 million, or 11.8%, to $139.5 million in the three months ended March 31, 2021 compared to $158.2 million in the three months ended March 31, 2020. This decrease is primarily due to the impact of COVID-19, which resulted in higher collectibility related adjustments, lower parking income, and lower percentage rent. Also contributing to the decreases were higher snow removal costs, and 2020 property sales, partially offset by the opening of our new office building at Santana Row in early 2020 and redevelopment related occupancy increases at one of our properties.
Other Operating
Depreciation and Amortization
Depreciation and amortization expense increased $1.7 million, or 2.7%, to $63.9 million in the three months ended March 31, 2021 from $62.2 million in the three months ended March 31, 2020. This increase is due primarily to accelerated depreciation related to a vacating tenant, placing redevelopment properties into service, the opening of our new office building at Santana Row in early 2020, and the acquisition of the previously unconsolidated Pike & Rose hotel joint venture in January 2021, partially offset by 2020 property sales.
Gain on Sale of Real Estate and Change in Control of Interest
The $17.4 million gain on sale of real estate and change in control of interest for the three months ended March 31, 2021 is due primarily to a $15.6 million gain related to the sale of a portion of Graham Park Plaza in Falls Church, Virginia and a $2.1 million gain relating to the acquisition of the previously unconsolidated Pike & Rose hotel joint venture (see Note 3 for additional disclosure).
Operating Income
Operating income decreased $2.9 million, or 3.4%, to $82.8 million in the three months ended March 31, 2021 compared to $85.7 million in the three months ended March 31, 2020. This decrease is primarily due to the impact of COVID-19, which resulted in higher collectibility related adjustments, lower parking income, and lower percentage rent. Also contributing to the decrease were higher snow removal costs and 2020 property sales, partially offset by the gains related to the sale of a portion of Graham Park Plaza and the previously unconsolidated Pike & Rose hotel joint venture, the opening of our new office building at Santana Row in early 2020, and redevelopment related occupancy increases at one of our properties.
Other
Interest Expense
Interest expense increased $3.6 million, or 12.8%, to $32.1 million in the three months ended March 31, 2021 compared to $28.4 million in the three months ended March 31, 2020. This increase is due primarily to the following:
an increase of $7.4 million from higher weighted average borrowings primarily from the May 2020 debt issuances in response to the COVID-19 pandemic,
partially offset by,
a decrease of $2.9 million due to a lower overall weighted average borrowing rate, and
an increase of $0.8 million in capitalized interest, primarily attributable to the development of Phase III of Assembly Row.
Gross interest costs were $38.6 million and $34.2 million in the three months ended March 31, 2021 and March 31, 2020, respectively. Capitalized interest was $6.5 million and $5.7 million for the three months ended March 31, 2021 and March 31, 2020, respectively.
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Liquidity and Capital Resources
Due to the nature of our business and strategy, we typically generate significant amounts of cash from operations which is largely paid to our common and preferred shareholders in the form of dividends because as a REIT, we are generally required to make annual distributions to shareholders of at least 90% of our taxable income (cash dividends paid in the three months ended March 31, 2021 were approximately $83.1 million). Remaining cash flow from operations after dividend payments is used to fund recurring and non-recurring capital projects (such as tenant improvements and redevelopments), and regular debt service requirements (including debt service relating to additional or replacement debt, as well as scheduled debt maturities). We maintain a $1.0 billion revolving credit facility to fund short term cash flow needs and also look to the public and private debt and equity markets, joint venture relationships, and property dispositions to fund capital expenditures on a long-term basis.

We are currently experiencing lower levels of cash from operations due to lower rent collections from tenants impacted by the COVID-19 pandemic (see further discussion under the "Outlook" section of this Item 2). While the overall economic impacts of the pandemic are unknown, we have taken multiple steps to strengthen our financial position, maximize liquidity, and to provide maximum flexibility during these uncertain times, including maintaining levels of cash significantly in excess of the cash balances we have historically maintained.

During the three months ended March 31, 2021, there were no borrowings on our $1.0 billion unsecured revolving credit facility, and as of March 31, 2021, we had cash and cash equivalents of $779.9 million. We also had outstanding forward sales agreements for proceeds of $35.3 million as of March 31, 2021, and the capacity to issue up to $404.4 million in common shares both under our ATM equity program.
On April 16, 2021, we repaid $100.0 million of our existing $400.0 million term loan, amended the agreement on the remaining $300.0 million to lower the current spread over LIBOR from 135 basis points to 80 basis points based on our current credit rating, and extended the maturity date to April 16, 2024, along with two one-year extensions, at our option. Subsequently, over the next 12 months, we have $124.2 million of secured debt maturing, which we intend to pay off at maturity.
Our overall capital requirements for the remainder of 2021 will continue to be impacted by the extent and duration of COVID-19 related closures, impacts on our cash collections, and overall economic impacts that might occur. Cash requirements will also be impacted by acquisition opportunities and the level and general timing of our redevelopment and development activities. While the amount of future expenditures will depend on numerous factors, we expect to see higher levels of capital investments in our properties under development and redevelopment, as we continue to invest in the current phase of these projects and are not expecting COVID-19 related halts in construction activities similar to those experienced in 2020. With respect to other capital investments related to our existing properties, we expect to incur levels more consistent with prior years with an overall increase compared to 2020.
We believe that the cash on our balance sheet together with rents we collect, as well as our $1.0 billion revolving credit facility will allow us to continue to operate our business in the near-term. Given our recent ability to access the capital markets, we also expect debt or equity to be available to us. We also have the ability to delay the timing of certain development and redevelopment projects as well as limit future acquisitions, as well as limit future acquisitions, reduce our operating expenditures, or re-evaluate our dividend policy.

While the COVID-19 pandemic has continued to negatively impact our business during the quarter ended March 31, 2021, and we expect it will continue to negatively impact our business in the short term, we maintain our long term commitment to a conservative capital structure that will allow us to maintain strong debt service coverage and fixed-charge coverage ratios as part of our commitment to investment-grade debt ratings.
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Summary of Cash Flows
 Three Months Ended March 31,
 20212020
 (In thousands)
Cash provided by operating activities$115,106 $118,749 
Cash used in investing activities(74,841)(151,832)
Cash (used in) provided by financing activities(48,719)898,895 
(Decrease) increase in cash, cash equivalents and restricted cash(8,454)865,812 
Cash, cash equivalents and restricted cash, beginning of year816,896 153,614 
Cash, cash equivalents and restricted cash, end of period$808,442 $1,019,426 

Net cash provided by operating activities decreased $3.6 million to $115.1 million during the three months ended March 31, 2021 from $118.7 million during the three months ended March 31, 2020. The decrease was primarily attributable to lower net income before non-cash items, partially offset by timing of cash receipts including lower prepaid rent balances in 2020 as a result of the COVID-19 pandemic.
Net cash used in investing activities decreased $77.0 million to $74.8 million during the three months ended March 31, 2021 from $151.8 million during the three months ended March 31, 2020. The decrease was primarily attributable to:
a $38.6 million decrease in capital expenditures as we prepare to deliver portions of Phase III of both our Assembly Row and Pike & Rose projects,
$19.9 million of net proceeds from the sale of a portion of Graham Park Plaza in Falls Church, Virginia in March 2021, and
$17.4 million for net costs paid in 2020 relating to the partial sale under threat of condemnation at San Antonio Center in 2019.
Net cash provided by financing activities decreased $947.6 million to $48.7 million used during the three months ended March 31, 2021 from $898.9 million provided in the three months ended March 31, 2020. The decrease was primarily attributable to:
$990.0 million in borrowings on our revolving credit facility in 2020 to provide maximum flexibility and liquidity at the beginning of the COVID-19 pandemic, and
a $47.3 million increase in repayment of mortgages, finance leases, and notes payable primarily due to the $31.5 million repayment of the mortgage loan related to the Pike & Rose hotel in January 2021 and the $16.2 million repayment of the mortgage loan on Sylmar Towne Center in February 2021,
partially offset by
an $87.3 million increase in net proceeds from the issuance of common shares under our ATM program during the three months ended March 31, 2021.
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Debt Financing Arrangements
The following is a summary of our total debt outstanding as of March 31, 2021:
Description of DebtOriginal
Debt
Issued
Principal Balance as of March 31, 2021Stated Interest Rate as of
March 31, 2021
Maturity Date
 (Dollar amounts in thousands)  
Mortgages payable
Secured fixed rate
Plaza Del SolAcquired$7,992 5.23 %December 1, 2021
The AVENUE at White Marsh52,705 52,705 3.35 %January 1, 2022
Montrose Crossing80,000 65,109 4.20 %January 10, 2022
AzaleaAcquired40,000 3.73 %November 1, 2025
Bell GardensAcquired12,339 4.06 %August 1, 2026
Plaza El Segundo125,000 125,000 3.83 %June 5, 2027
The Grove at Shrewsbury (East)43,600 43,600 3.77 %September 1, 2027
Brook 3511,500 11,500 4.65 %July 1, 2029
Hoboken (24 Buildings) (1)56,45056,450 LIBOR + 1.95%December 15, 2029
Various Hoboken (14 Buildings) (2)Acquired32,482 VariousVarious through 2029
ChelseaAcquired5,140 5.36 %January 15, 2031
Hoboken (1 Building) (3)Acquired16,478 3.75 %July 1, 2042
Subtotal468,795 
Net unamortized debt issuance costs and premium(1,845)
Total mortgages payable, net466,950 
Notes payable
Term Loan (4)400,000 400,000 LIBOR + 1.35%May 6, 2021
Revolving credit facility (5)1,000,000 — LIBOR + 0.775%January 19, 2024
Various7,239 3,256 11.31%Various through 2028
Subtotal403,256 
Net unamortized debt issuance costs(175)
Total notes payable, net403,081 
Senior notes and debentures
Unsecured fixed rate
2.75% notes275,000 275,000 2.75 %June 1, 2023
3.95% notes600,000 600,000 3.95 %January 15, 2024
1.25% notes400,000 400,000 1.25 %February 15, 2026
7.48% debentures50,000 29,200 7.48 %August 15, 2026
3.25% notes475,000 475,000 3.25 %July 15, 2027
6.82% medium term notes40,000 40,000 6.82 %August 1, 2027
3.20% notes400,000 400,000 3.20 %June 15, 2029
3.50% notes400,000 400,000 3.50 %June 1, 2030
4.50% notes550,000 550,000 4.50 %December 1, 2044
3.625% notes250,000 250,000 3.625 %August 1, 2046
Subtotal3,419,200 
Net unamortized debt issuance costs and premium(14,321)
Total senior notes and debentures, net3,404,879 
Total debt, net$4,274,910 
_____________________
1)On November 26, 2019, we entered into two interest rate swap agreements that fix the interest rate on this mortgage loan at 3.67%
2)The interest rates on these mortgages range from 3.91% to 5.00%.
3)This mortgage loan has a fixed interest rate, however, the rate resets every five years until maturity. The current interest rate is fixed until July 1, 2022, and the loan is prepayable at par anytime after this date.
4)On April 16, 2021, we repaid $100.0 million of the term loan, amended the agreement on the remaining $300.0 million to lower the current spread over LIBOR from 135 basis points to 80 basis points based on our current credit rating, and extended the maturity date to April 16, 2024, along with two one-year extensions, at our option.
5)During the three months ended March 31, 2021, there were no borrowings on our $1.0 billion revolving credit facility.
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Our revolving credit facility and other debt agreements include financial and other covenants that may limit our operating activities in the future. As of March 31, 2021, we were in compliance with all financial and other covenants related to our revolving credit facility, term loan, and senior notes. Additionally, we were in compliance with all of the financial and other covenants that could trigger loan default on our mortgage loans. If we were to breach any of these financial and other covenants and did not cure the breach within an applicable cure period, our lenders could require us to repay the debt immediately and, if the debt is secured, could immediately begin proceedings to take possession of the property securing the loan. Many of our debt arrangements, including our public notes and our revolving credit facility, are cross-defaulted, which means that the lenders under those debt arrangements can put us in default and require immediate repayment of their debt if we breach and fail to cure a default under certain of our other debt obligations. As a result, any default under our debt covenants could have an adverse effect on our financial condition, our results of operations, our ability to meet our obligations and the market value of our shares. Our organizational documents do not limit the level or amount of debt that we may incur.
The following is a summary of our scheduled principal repayments as of March 31, 2021:
 
UnsecuredSecuredTotal
 (In thousands) 
2021$400,662 (1)$10,861 $411,523 
2022751 119,706 120,457   
2023275,765 3,549 279,314   
2024600,656 (2)3,688 604,344   
2025333 48,033 48,366   
Thereafter2,544,289 282,958 2,827,247   
$3,822,456   $468,795 $4,291,251 (3)
__________________    
1)    This includes our $400.0 million term loan, which was to mature on May 6, 2021. On April 16, 2021, we repaid $100.0 million of the term loan, amended the agreement on the remaining $300.0 million to lower the current spread over LIBOR from 135 basis points to 80 basis points based on our current credit rating, and extended the maturity date to April 16, 2024, along with two one-year extensions, at our option.
2)    Our $1.0 billion revolving credit facility matures on January 19, 2024, plus two six-month extensions at our option. As of March 31, 2021, there was no outstanding balance under this credit facility.
3)    The total debt maturities differ from the total reported on the consolidated balance sheet due to the unamortized net debt issuance costs and premium/discount on mortgage loans, notes payable, and senior notes as of March 31, 2021.
Interest Rate Hedging
We may use derivative instruments to manage exposure to variable interest rate risk. We generally enter into interest rate swaps to manage our exposure to variable interest rate risk and treasury locks to manage the risk of interest rates rising prior to the issuance of debt. We enter into derivative instruments that qualify as cash flow hedges and do not enter into derivative instruments for speculative purposes.
Interest rate swaps associated with cash flow hedges are recorded at fair value on a recurring basis. Effectiveness of cash flow hedges is assessed both at inception and on an ongoing basis. The effective portion of changes in fair value of the interest rate swaps associated with cash flow hedges is recorded in other comprehensive loss which is included in "accumulated other comprehensive loss" on the balance sheet and statement of shareholders' equity. Cash flow hedges become ineffective if critical terms of the hedging instrument and the debt instrument do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and LIBOR rate. In addition, we evaluate the default risk of the counterparty by monitoring the credit-worthiness of the counterparty which includes reviewing debt ratings and financial performance. If a cash flow hedge is deemed ineffective, the ineffective portion of changes in fair value of the interest rate swaps associated with cash flow hedges is recognized in earnings in the period affected.
As of March 31, 2021, we have two interest rate swap agreements that effectively fix the rate on a mortgage payable associated with our Hoboken portfolio at 3.67%. Our Assembly Row hotel joint venture is also a party to two interest rate swap agreements that effectively fix their debt at 5.206%. All swaps were designated and qualify as cash flow hedges. Hedge ineffectiveness has not impacted earnings as of March 31, 2021.
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REIT Qualification
We intend to maintain our qualification as a REIT under Section 856(c) of the Code. As a REIT, we generally will not be subject to corporate federal income taxes on income we distribute to our shareholders as long as we satisfy certain technical requirements of the Code, including the requirement to distribute at least 90% of our taxable income to our shareholders.
Funds From Operations
Funds from operations (“FFO”) is a supplemental non-GAAP financial measure of real estate companies’ operating performance. The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as follows: net income, computed in accordance with U.S. GAAP, plus real estate related depreciation and amortization and excluding gains and losses on the sale of real estate or changes in control, net of tax, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. We compute FFO in accordance with the NAREIT definition, and we have historically reported our FFO available for common shareholders in addition to our net income and net cash provided by operating activities. It should be noted that FFO:
does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income);
should not be considered an alternative to net income as an indication of our performance; and
is not necessarily indicative of cash flow as a measure of liquidity or ability to fund cash needs, including the payment of dividends.
We consider FFO available for common shareholders a meaningful, additional measure of operating performance primarily because it excludes the assumption that the value of the real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation. We use FFO primarily as one of several means of assessing our operating performance in comparison with other REITs. Comparison of our presentation of FFO to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.
An increase or decrease in FFO available for common shareholders does not necessarily result in an increase or decrease in aggregate distributions because our Board of Trustees is not required to increase distributions on a quarterly basis. However, we must distribute at least 90% of our annual taxable income to remain qualified as a REIT. Therefore, a significant increase in FFO will generally require an increase in distributions to shareholders although not necessarily on a proportionate basis.
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The reconciliation of net income to FFO available for common shareholders is as follows:

Three Months Ended March 31,