SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: September 30, 1995
------------------------------------------
Commission File No. 1-7533
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FEDERAL REALTY INVESTMENT TRUST
-------------------------------
(Exact name of registrant as specified in its charter)
District of Columbia 52-0782497
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4800 Hampden Lane, Suite 500, Bethesda, Maryland 20814
--------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(301) 652-3360
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No_____.
-----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at November 2, 1995
- ------------------------------------------------------------------------------
Shares of Beneficial Interest 32,147,763
This report, including exhibits, contains 33 pages.
FEDERAL REALTY INVESTMENT TRUST
S.E.C. FORM 10-Q
September 30, 1995
I N D E X
PART I. FINANCIAL INFORMATION PAGE NO.
Accountants' Report 4
Consolidated Balance Sheets
September 30, 1995 (unaudited) and
December 31, 1994 (audited) 5
Consolidated Statements of Operations (unaudited)
Nine months ended September 30, 1995 and 1994 6
Consolidated Statements of Operations (unaudited)
Three months ended September 30, 1995 and 1994 7
Consolidated Statements
of Shareholders' Equity (unaudited)
Nine months ended September 30, 1995 and 1994 8
Consolidated Statements of Cash Flows (unaudited)
Nine months ended September 30, 1995 and 1994 9
Notes to Financial Statements 10-15
Management's Discussion and Analysis of
Financial Condition and Results of Operations 16-22
PART II. OTHER INFORMATION 23
2
FEDERAL REALTY INVESTMENT TRUST
S.E.C. FORM 10-Q
September 30, 1995
PART I. FINANCIAL INFORMATION
The following financial information is submitted in response to
the requirements of Form 10-Q and does not purport to be financial
statements prepared in accordance with generally accepted accounting
principles since they do not include all disclosures which might be
associated with such statements. In the opinion of management, such
information includes all adjustments, consisting only of normal
recurring accruals, necessary to a fair statement of the results for
the interim periods presented.
The balance sheet as of December 31, 1994 was audited by Grant
Thornton LLP, independent public accountants, who expressed an
unqualified opinion on it in their report dated February 10, 1995.
All other financial information presented is unaudited but has been
reviewed as of September 30, 1995 and for each of the nine month
periods ended September 30, 1995 and 1994 by Grant Thornton LLP whose
report thereon appears on Page 4. All adjustments and disclosures
proposed by them have been reflected in the data presented.
3
Accountants' Review Report
- --------------------------
Trustees and Shareholders
Federal Realty Investment Trust
We have reviewed the accompanying consolidated balance sheet of Federal Realty
Investment Trust as of September 30, 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for the nine month
periods ended September 30, 1995 and 1994 and the consolidated statements of
operations for the three-month periods ended September 30, 1995 and 1994. These
financial statements are the responsibility of the Trust's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical review procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1994 and the
related consolidated statements of operations, shareholders' equity and cash
flows for the year then ended (not presented herein); and in our report dated
February 10, 1995, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1994 is
stated fairly, in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
Grant Thornton LLP
Washington, D.C.
November 7, 1995
4
Federal Realty Investment Trust
CONSOLIDATED BALANCE SHEETS
(see accountants' review report)
September 30, December 31,
1995 1994
------------- ------------
(unaudited)
ASSETS (in thousands)
Investments
Real estate, at cost $962,473 $852,722
Less accumulated depreciation and amortization (182,737) (160,636)
--------- ---------
779,736 692,086
Mortgage notes receivable 13,181 13,178
--------- ---------
792,917 705,264
Other Assets
Cash 3,431 3,995
Investments 3,744 3,588
Notes receivable - officers 1,023 845
Accounts receivable 13,317 16,023
Prepaid expenses and other assets,
principally
property taxes, insurance, and lease
commissions 24,635 19,158
Debt issue costs (net of accumulated
amortization
of $3,736,000 and $3,206,000,
respectively) 3,640 2,931
--------- ---------
$842,707 $751,804
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Obligations under capital leases $132,114 $132,924
Mortgages payable 90,797 102,781
Notes payable 45,799 61,883
Accrued expenses 15,814 10,675
Accounts payable 5,393 6,566
Dividends payable 13,166 12,486
Security deposits 2,999 2,687
Prepaid rents 914 1,017
Senior notes 125,000 -
Convertible subordinated debentures 75,289 75,289
Investors' interest in consolidated assets 1,187 2,274
Commitments and contingencies - -
Shareholders' equity
Common shares of beneficial interest, no
par
or stated value, unlimited authorization,
issued 32,174,790 and 31,669,434 shares,
respectively 507,815 496,958
Accumulated dividends in excess of Trust
net income (165,010) (144,553)
Allowance for unrealized loss on
marketable securities - (53)
--------- ---------
342,805 352,352
Less 61,328 and 60,200 common shares,
respectively, in treasury - at
cost, and subscriptions receivable (8,570) (9,130)
--------- ---------
334,235 343,222
--------- ---------
$842,707 $751,804
========= =========
The accompanying notes are an integral part of these statements.
5
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
(see accountants' review report)
(unaudited)
Nine Months ended September 30,
1995 1994
--------------- --------------
(In thousands, except per share data)
Revenue
Rental income $104,557 $94,168
Interest 3,049 3,046
Other income 5,283 4,068
--------- ---------
112,889 101,282
Expenses
Rental 25,059 27,183
Real estate taxes 10,704 8,874
Interest 28,814 23,533
Administrative 4,483 4,448
Other charges 758
Depreciation and amortization 25,815 21,736
--------- ---------
94,875 86,532
--------- ---------
Operating income before investors' share
of operations and loss on sale of real estate 18,014 14,750
Investors' share of operations 275 (495)
--------- ---------
Income before loss on sale of real estate 18,289 14,255
Loss on sale of real estate (545) -
--------- ---------
Net Income $17,744 $14,255
========= =========
Weighted Average Number of Common Shares 31,744 30,368
========= =========
Earnings per share
Income before loss on sale of real estate $0.58 $0.47
Loss on sale of real estate (0.02)
--------- ---------
$0.56 $0.47
========= =========
The accompanying notes are an integral part of these statements.
6
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
(see accountants' review report)
(unaudited)
Three months ended September 30,
1995 199
---------- -----------
(In thousands, except per share data)
Revenue
Rental income $35,910 $32,238
Interest 1,156 1,009
Other income 1,907 1,549
--------- --------
38,973 34,796
Expenses
Rental 8,840 9,247
Real estate taxes 3,719 3,254
Interest 10,098 7,718
Administrative 1,666 1,264
Other charges 758
Depreciation and amortization 8,827 7,570
--------- --------
33,150 29,811
--------- --------
Operating income before investors' share
of operations and loss on sale of real estate 5,823 4,985
Investors' share of operations 105 (19)
--------- --------
Income before loss on sale of real estate 5,928 4,966
Loss on sale of real estate (10) -
--------- --------
Net Income $5,918 $4,966
========= ========
Weighted Average Number of Common Shares 31,850 $31,563
========= ========
Earnings per share
Income before loss on sale of real estate $0.19 $0.16
Loss on sale of real estate (0.00) -
--------- --------
$0.19 $0.16
========= ========
The accompanying notes are an integral part of these statements.
7
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(see accountants' review report)
(unaudited)
Nine months ended September 30,
1995 1994
--------- ---------- --------- --------
(In thousands, except per share amounts) Shares Amount Shares Amount
Common Shares of Beneficial Interest
Balance, beginning of period 31,669,434 $496,958 28,077,999 $408,005
Exercise of stock options 19,244 359 45,740 1,009
Shares issued under dividend reinvestment
plan 148,585 3,157 113,143 2,873
Conversion of 5 1/4% subordinated
debentures, net 1,729 64
Shares purchased under share
purchase plan - - 40,000 1,000
Shares issued to purchase
shopping center 337,527 7,341
Net proceeds of public offering and
private placement 3,340,000 82,963
---------- -------- ---------- --------
Balance, end of period 32,174,790 $507,815 31,618,611 $495,914
========== ======== ========== ========
Common Shares of Beneficial Interest in Treasury - at
cost and Subscriptions Receivable
Balance, beginning of period (539,188) ($9,130) (496,499) ($7,759)
Decrease in subscriptions receivable 34,250 568 27,875 422
Net decrease (increase) in stock
option loans 5,682 17 (30,768) (796)
Purchase of treasury shares (1,128) (25)
Subscription of shares under share purchase plan - - (40,000) (1,000)
-------- -------- --------- --------
Balance, end of period (500,384) ($8,570) (539,392) ($9,133)
======== ======== ========= ========
Allowance for Unrealized Loss on Marketable Securities
Balance, beginning of period ($53) ($364)
Unrealized (loss ) recovery 53 (98)
----- ------
Balance, end of period $0 ($462)
===== ======
Accumulated Dividends in Excess of Trust Net Income
Balance, beginning of period ($144,553) ($116,823)
Net income 17,744 14,255
Dividends declared to shareholders (38,201) (35,710)
---------- ----------
Balance, end of period ($165,010) ($138,278)
========== ==========
The accompanying notes are an integral part of these statements.
8
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF CASH FLOWS
(see accountants' review report)
(unaudited)
Nine months ended September 30,
(In thousands) 1995 1994
---------------- -------------
OPERATING ACTIVITIES
Net income $17,744 $14,255
Adjustments to reconcile net income to net cash
provided by operations
Depreciation and amortization 25,815 21,736
Rent abatements in lieu of leasehold improvements,
net of tenant improvements retired (1,098) (394)
Imputed interest and amortization of debt cost 543 418
Amortization of deferred compensation and
forgiveness of officers' notes 399 460
Payment of trustees' fees in shares of beneficial interest 136 132
Unrealized gain on marketable securities (46)
Write off of mortgage note receivable and accrued interest - 758
Loss on sale of real estate 545
Changes in assets and liabilities
Decrease in accounts receivable 2,706 713
Increase in prepaid expenses and other
assets before depreciation and amortization (5,576) (4,668)
(Decrease) increase in operating accounts payable,
security deposits and prepaid rent 812 (1,963)
Increase (decrease) in accrued expenses, net of the premium
put on the 5 1/4% convertible subordinated debentures 5,369 (884)
-------- --------
Net cash provided by operating activities 47,349 30,563
INVESTING ACTIVITIES
Acquisition of real estate (67,851) (33,840)
Capital expenditures (26,026) (27,504)
Proceeds from sale of real estate 1,782
Net increase in notes receivable (218) (175)
Net (increase) decrease in temporary investments (56) 237
-------- --------
Net cash used in investing activities (92,369) (61,282)
FINANCING ACTIVITIES
Regular payments on mortgages, capital leases, and
notes payable 1,665 (1,543)
Balloon payments of mortgages and notes payable (23,601)
Proceeds of mortgage financings, net of costs 22,500
Net change in lines of credit (18,825) 3,587
Issuance of senior notes, net of costs 123,761 -
Redemption of 5 1/4% convertible subordinated -
debentures including premium put - (47,790)
Dividends paid (35,463) (32,185)
Issuance of shares of beneficial interest 1,336 83,934
Decrease in minority interest (1,087) (105)
-------- --------
Net cash provided by financing activities 44,456 28,398
-------- --------
Decrease in cash (564) (2,321)
Cash at beginning of period 3,995 9,635
-------- --------
Cash at end of period $3,431 $7,314
======== ========
The accompanying notes are an integral part of these statements.
9
Federal Realty Investment Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(see accountants' review report)
(unaudited)
NOTE A - ACCOUNTING POLICIES AND OTHER DATA
Reference should be made to the notes to financial statements included in
the Annual Report to shareholders for the year ended December 31, 1994 which
contain the Trust's accounting policies and other data.
Certain previously reported amounts for 1994 have been reclassified to
assure comparability of all periods presented. See Note H.
NOTE B - DIVIDENDS PAYABLE
On September 12, 1995 the Trustees declared a cash dividend of $.41 per
share, payable October 13, 1995 to shareholders of record September 25, 1995.
NOTE C - REAL ESTATE
During the period January 1, 1995 through September 30, 1995 the Trust
purchased thirteen commercial buildings for cash ("main street retail
properties") as follows: (1) a 6,800 square foot building in Greenwich,
Connecticut for $2.0 million on February 16, 1995; (2) a 125,000 square foot
group of seven buildings in West Hartford, Connecticut for $15.3 million on
April 5, 1995; (3) a 35,500 square foot building in Greenwich, Connecticut on
April 12, 1995 for $12.9 million; (4) a 10,000 square foot building in
Westport, Connecticut for $5.7 million on June 15, 1995; (5) an 11,000 square
foot building in Westfield, New Jersey for $2.2 million on August 16, 1995; (6)
a 12,000 square foot building in Brookline, Massachusetts for $3.7 million on
September 7, 1995 and (7) a 7,000 square foot building in Evanston, Illinois for
$1.0 million on September 12, 1995. In connection with certain of these
purchases, brokerage commissions of $548,000 were incurred to a company that is
fifty percent owned by a brother of the Trust's president. These commissions
were paid pursuant to a brokerage contract on terms comparable to terms
contained in contracts which the Trust has with brokers providing similar
services in other geographic areas.
In addition the Trust has purchased two shopping centers and two properties
abutting existing shopping centers. On April 27, 1995 the Trust purchased the
302,000 square foot Finley Square
10
Shopping Center in Downers Grove, Illinois for cash of $18.8 million. On
September 22, 1995 the Trust acquired the 284,000 square foot Bristol Shopping
Center in Bristol, Connecticut for $19.6 million, which was paid by assuming a
mortgage of $11.3 million, by issuing 337,527 shares of common stock, valued at
$7.3 million, and by cash for the balance. A commission of $142,500 was paid to
the company which is 50% owned by a brother of the Trust's president in
connection with the purchase of this shopping center. On June 12, 1995 the Trust
purchased a 12,400 square foot building contiguous to its Bethesda Row property
for $2.0 million in cash. On September 1, 1995 the Trust purchased a building
abutting Flourtown Shopping Center for $3.1 million in cash.
On August 1, 1995 the Trust sold the 111,000 square foot North City
Shopping Center in New Castle, Pennsylvania for $1.8 million, resulting in a
loss of $545,000.
NOTE D - Senior Notes
On January 19, 1995 the Trust issued $100.0 million of 8 7/8% Notes, due
January 15, 2000. The notes, which were issued at a price of 99.815%, pay
interest semiannually on January 15 and July 15 and are not redeemable prior to
maturity. After deducting the underwriting discount and other costs, the Trust
netted approximately $98.9 million.
In order to protect itself against the risk that the general level of
interest rates for such securities would rise before the senior notes were
priced, in December 1994, the Trust entered into two interest rate hedge
agreements on a total principal amount of $75.0 million. The cost of the
agreements, which terminated on January 20, 1995, was $21,000, which is being
amortized into interest expense over the life of the notes.
In January 1995 the Trust executed a five year interest rate swap on $25.0
million, whereby the Trust swapped fixed interest payment obligations of 8.136%
for a floating rate interest payment of three month LIBOR. The floating rate
during the first quarter of 1995 was 6.1875%. In May 1995 the swap was
terminated and the Trust sold the swap for $1.5 million, which is being
amortized as a deduction to interest expense over the remaining term.
On April 21, 1995 the Trust issued $25.0 million of senior notes. The
notes, which are due April 21, 2002 and bear interest at 8%, payable
semiannually, were issued at a price of 99.683%. The proceeds of $24.9 million
were used to repay amounts which had been borrowed on the revolving credit
facilities during April 1995 to fund acquisitions and property renovations.
11
NOTE E - MORTGAGES PAYABLE
In January, 1995 the Trust repaid the $22.5 million mortgage on Northeast
Plaza in Atlanta, Georgia with proceeds from the senior note offering. On
September 22, 1995 in connection with the purchase of the Bristol Shopping
Center, the Trust assumed a $11.3 million mortgage. The mortgage, which bears
interest at 9.65%, is payable in monthly installments of $106,446 with a balloon
payment of $10.7 million due in August 1998.
NOTE F - NOTES PAYABLE
The Trust has $130.0 million of unsecured medium term revolving credit
facilities with four banks. The facilities, which bear interest at LIBOR plus
85 to 100 basis points, require fees and have covenants requiring a minimum
shareholders' equity and a maximum ratio of debt to net worth. The maximum
drawn under these facilities during the first nine months of 1995 was $66.8
million. The weighted average interest rate on borrowings for the nine months
ended September 30, 1995 was 7.0%. At September 30, 1995 there was $35.9
million drawn under these facilities.
In January 1995 the Trust paid a $1.1 million note that had been issued in
connection with the purchase of Queen Anne Plaza in December 1994. In
connection with the buyout of a tenant at Queen Anne Plaza in January 1995, the
Trust issued a noninterest bearing note payable of $2.2 million, due in annual
installments of $200,000 for 11 years. Using an interest rate of 8 7/8%, the
note has been recorded at its discounted value of $1.7 million.
On September 12, 1995 in connection with a lease transaction at Barracks
Road Shopping Center the Trust issued a $2.5 million non-interest bearing note
which is due November 13, 1995.
NOTE G - SHAREHOLDERS' EQUITY
During the first nine months of 1995, 19,244 shares were issued at prices
ranging from $15.00 per share to $20.875 per share as the result of the exercise
of stock options. The Trust accepted notes from certain of its employees of
$36,000 in connection with the issuance of certain of these shares.
In September 1995 the terms of loans issued to officers and employees of
the Trust in connection with the exercise of stock options were modified. These
loans, which previously had a five year term, may now have a term extending to
the employee's or officer's retirement date. Consequently these loans are now
being classified as a component of stockholder's equity rather than as an asset.
The 1994 balances of notes receivable-officers
12
and subscriptions receivable have been reclassified to allow comparability.
On February 15, 1995, 719,000 stock options at $20.75 per share were
granted to employees of the Trust. On May 10, 1995, the eight trustees of the
Trust other than the president were each awarded options to purchase 2,500
shares at $22 per share.
As stated in Note C, 337,527 shares valued at $7.3 million were issued in
September 1995 as partial consideration for the purchase of Bristol Shopping
Center.
NOTE H - INTEREST EXPENSE
The Trust incurred interest expense totaling $29.5 million during the first
nine months of 1995 and $23.7 million during the first nine months of 1994, of
which $672,000 and $190,000, respectively, were capitalized. Interest paid was
$23.8 million in the first nine months of 1995 and $31.3 million in the first
nine months of 1994.
NOTE I - COMMITMENTS AND CONTINGENCIES
The State of New Jersey Division of Taxation has assessed the Trust
$364,000 in taxes, penalty and interest for the years 1985 through 1990, since
the State has disallowed the dividends paid deduction in computing New Jersey
taxable income. The Trust has protested this assessment since the Trust
believes that it is entitled to the deduction. In a case involving another real
estate investment trust, the New Jersey tax court ruled that the dividends paid
deduction was allowable and this decision was upheld by the Appellate Court.
As previously reported, certain of the Trust's shopping centers have
some environmental contamination. The North Carolina Department of the
Environment, Health and Natural Resources ("DEHNR") issued a Notice of Violation
("NOV") against a former drycleaner tenant at Eastgate Shopping Center in Chapel
Hill, North Carolina concerning a spill at the shopping center. As owner of
the shopping center, the Trust was named in and received a copy of the NOV.
Estimates to remediate the spill range from $300,000 to $500,000. The Trust has
entered into an agreement with two previous owners of the shopping center to
share the costs to assess and remediate. In 1993 the Trust recorded a liability
of $120,000 as its estimated share of the clean up costs.
In 1992 contaminants at levels in excess of New Jersey cleanup standards
were identified at a shopping center in New Jersey. The Trust has retained an
environmental consultant to investigate the contamination. The Trust is also
evaluating whether it has insurance coverage for this matter. At this time,
13
the Trust is unable to determine what the range of remediation costs might be.
The Trust has also identified chlorinated solvent contamination at another
property. The contamination appears to be linked to the current and/or previous
dry cleaner. The Trust intends to look to the responsible parties for any
remediation effort. Evaluation of this situation is preliminary and it is
impossible to estimate the range of remediation costs, if any.
On September 22, 1995 the Trust purchased the Bristol Shopping Center in
Bristol, Connecticut. Pursuant to an agreement executed at closing, the Trust
agreed to perform all remedial measures necessary to obtain a final letter of
compliance from the Connecticut Commissioner of Environmental Protection with
respect to certain identified soil and ground water contamination associated
with a former dry cleaning operation. The seller established an escrow account
at closing of $187,500 to cover such remedial measures and has indemnified the
Trust in connection with the identified contamination.
The Trust reserved $2.25 million at closing in 1993 for environmental
issues principally associated with Gaithersburg Square Shopping Center.
Pursuant to an indemnity agreement entered into with the seller at closing, the
Trust agreed to take certain actions with respect to identified chlorinated
solvent contamination. The seller indemnified the Trust for certain third party
claims and government requirements related to contamination at adjacent
properties. During the third quarter of 1995 the reserve was reduced by
$269,000 with a corresponding decrease in the basis of land at one shopping
center since the environmental issue there was resolved.
At September 30, 1995 in connection with certain redevelopment projects and
tenant work, the Trust is contractually obligated on contracts of approximately
$3.3 million. At September 30, 1995 the Trust is also contractually obligated
under leases with tenants to provide approximately $10.6 million for
improvements.
Pursuant to the provisions of the respective partnership agreements, in the
event of exercise of put options by the other partners, the Trust would be
required to purchase the 99% limited partnership interest at Loehmann's Plaza at
its then fair market value and a 22.5% interest at Congressional Plaza at its
then fair market value.
14
NOTE K - COMPONENTS OF RENTAL INCOME
The components of rental income for the nine months ended September 30 are
as follows:
1995 1994
(in thousands)
Retail Properties
Minimum rents $81,644 $72,043
Cost reimbursements 17,813 17,025
Percentage rents 3,262 3,328
Apartments 1,838 1,772
-------- -------
$104,557 $94,168
======== =======
15
FEDERAL REALTY INVESTMENT TRUST
FORM 10-Q
SEPTEMBER 30, 1995
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Federal Realty meets its liquidity requirements through net cash provided
by operating activities, long term borrowing through debt offerings and
mortgages, medium and short term borrowing under revolving credit facilities,
and equity offerings. Because all or a significant portion of the Trust's net
cash provided by operating activities is distributed to shareholders, capital
outlays for property acquisitions, renovation projects and debt repayments
require funding from borrowing or equity offerings.
Net cash provided by operating activities increased from $30.6 million for
the nine months ended September 30, 1994 to $47.3 million for the nine months
ended September 30, 1995. The major sources of the increase were an increase of
$3.5 million in net income in 1995 over 1994, an increase of $4.1 million in
depreciation and amortization in 1995 over 1994, and a $10.1 million increase in
cash provided by changes in operating assets and liabilities in 1995 over 1994.
Dividends paid for the period in 1994 were $32.2 million versus 1995's $35.5
million.
In 1995 net cash provided by operating activities of $47.3 million is
comprised primarily of $17.8 million of net income increased by $25.8 million of
depreciation and amortization and $3.3 million of cash provided by changes in
operating assets and liabilities. In 1994 net cash provided by operating
activities of $30.6 million was comprised primarily of $14.3 million of net
income increased by $21.7 million of depreciation and amortization which was
offset by $6.8 million use of cash for operating assets and liabilities.
During the first nine months of 1995 the Trust purchased $42.9 million of
street retail properties, i.e. retail buildings in densely developed urban and
suburban areas. The Trust also purchased two shopping centers, the 302,000
square foot Finley Square Shopping Center in Downers Grove, Illinois for $18.8
million in April 1995 and the 250,000 square foot Bristol Shopping Center in
Bristol, Connecticut for $19.6 million in September 1995. In addition, in June
1995 the Trust purchased a newly constructed 12,400 square foot building,
contiguous to its Bethesda Row property for $2.0 million in cash and in
September 1995 the Trust purchased a building abutting its Flourtown Shopping
Center for $3.1 million. During the first nine months of 1995 the Trust spent
$26.0 million on improvements to its properties and
16
tenant work; these improvements included: (1) $2.8 million on Congressional
Plaza which redevelopment is in the final phases; (2) $1.7 million to buy out a
below market lease at Queen Anne Plaza; (3) $4.1 million on Gaithersburg Square
which is currently being expanded, redeveloped and retenanted; and (4) $2.8
million on the renovation of Brick Plaza. These acquisitons and renovations were
funded primarily by cash, the assumption of a $11.3 million mortgage on Bristol
Shopping Center and the issuance of 337,527 shares of common stock valued at
$7.3 million in connection with the purchase of Bristol.
On January 19, 1995 the Trust issued $100.0 million of 8 7/8% Notes, due
January 15, 2000, netting proceeds of approximately $98.9 million. The proceeds
from this issuance were used to repay a $22.5 million mortgage, to repay $66.8
million which was outstanding on its revolving credit facilities and to
partially fund the first quarter property acquisitions and improvements.
On April 21, 1995 the Trust issued $25 million of senior notes due 2002,
netting approximately $24.9 million, the proceeds of which were used to repay
amounts which had been borrowed on the revolving credit facilities during April
to fund acquisitions and property renovations.
The Trust has available $130.0 million of unsecured medium-term revolving
credit facilities with four banks. The facilities, which require fees and have
covenants requiring a minimum shareholders' equity and a maximum ratio of debt
to net worth, are used to fund acquisitions and other cash requirements until
conditions are favorable for issuing equity or long-term debt. At September 30,
1995 there was $35.9 million drawn under these facilities. The maximum amount
borrowed under these facilities during the first nine months of 1995 was $66.8
million. Amounts advanced under these facilities bear interest at LIBOR plus 85
- - 100 basis points; the weighted average interest rate on borrowings during the
first nine months of 1995 was 7.0%.
The Trust is committed under leases for approximately $10.6 million in
building improvement and tenant work. In addition the Trust has budgeted
approximately $24 million for the remainder of 1995 and early 1996 for
improvements to its properties, including the completion of renovations of
Congressional Plaza, Brick Plaza and Gaithersburg Square. Furthermore, the Trust
is actively seeking to acquire shopping centers in its core major metropolitan
markets and to acquire retail buildings in densely developed urban and suburban
areas. The Trust is also continuing to study site acquisitions in its core
markets to permit the Trust to develop shopping centers. These expenditures will
be funded with the revolving credit facilities pending their permanent financing
with either equity or debt.
17
On August 1, 1995 the Trust sold North City Plaza in New Castle,
Pennsylvania for $1.8 million, resulting in a loss on sale of $545,000.
The Trust believes that the amounts available under its revolving credit
facilities provide it with the liquidity needed for its short-term renovation
and acquisition plans. The Trust believes that the unencumbered value of its
properties and its access to the capital markets, as demonstrated by its past
success in raising capital, give it the ability to raise the capital, both debt
and equity, needed to fund its long-term capital and debt repayment needs.
CONTINGENCIES
The State of New Jersey Division of Taxation has assessed the Trust
$364,000 in taxes, penalty and interest for the years 1985 through 1990, since
the State has disallowed the dividends paid deduction in computing New Jersey
taxable income. The Trust has protested this assessment since the Trust
believes that it is entitled to the deduction. In a case involving another real
estate investment trust, the New Jersey tax court ruled that the dividends paid
deduction was allowable and this decision was upheld by the Appellate Court.
As previously reported, certain of the Trust's shopping centers have some
environmental contamination. The North Carolina Department of the Environment,
Health and Natural Resources ("DEHNR") issued a Notice of Violation ("NOV")
against a drycleaner tenant at Eastgate Shopping Center in Chapel Hill, North
Carolina concerning a spill at the shopping center. As owner of the shopping
center, the Trust was named in and received a copy of the NOV. Estimates to
remediate the spill range from $300,000 to $500,000. The Trust has entered into
an agreement with two previous owners of the shopping center to share the costs
to assess and remediate. In 1993 the Trust recorded a liability of $120,000 as
its estimated share of the clean up costs.
In 1992 contaminants at levels in excess of New Jersey cleanup standards
were identified at a shopping center in New Jersey. The Trust has retained an
environmental consultant to investigate the contamination. The Trust is also
evaluating whether it has insurance coverage for this matter. At this time, the
Trust is unable to determine what the range of remediation costs might be. The
Trust had also previously identified chlorinated solvent contamination at
another property. The contamination appears to be linked to the current and/or
previous dry cleaner. The Trust intends to look to the responsible parties for
any remediation effort. Evaluation of this situation is preliminary and it is
impossible to estimate the range of remediation costs, if any.
18
On September 22, 1995 the Trust purchased the Bristol Shopping Center in
Bristol, Connecticut. Pursuant to an agreement executed at closing, the Trust
agreed to perform all remedial measures necessary to obtain a final letter of
compliance from the Connecticut Commissioner of Environmental Protection with
respect to certain identified soil and ground water contamination associated
with a former dry cleaning operation. The seller established an escrow account
at closing of $187,500 to cover such remedial measures and has indemnified the
Trust in connection with the identified contamination.
The Trust reserved $2.25 million at closing in 1993 for environmental
issues principally associated with Gaithersburg Square Shopping Center.
Pursuant to an indemnity agreement entered into with the seller at closing, the
Trust agreed to take certain actions with respect to identified chlorinated
solvent contamination. The seller indemnified the Trust against certain third
party claims and government requirements related to contamination at adjacent
properties. During the third quarter of 1995 the reserve was reduced by
$269,000 with a corresponding reduction in the basis of land at one shopping
center since the environmental issue there was resolved.
Pursuant to the provisions of the respective partnership agreements, in the
event of the exercise of put options by the other partners, the Trust would be
required to purchase the 99% limited partnership interest at Loehmann's Plaza at
its then fair market value and a 22.5% interest at Congressional Plaza at its
then fair market value.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
The Trust has historically reported its funds from operations in addition
to its net income and net cash provided by operating activities. Funds from
operations is a supplemental measure of real estate companies' operating
performance which excludes historical cost depreciation, since real estate
values have historically risen and fallen with market conditions rather than
over time. Funds from operations was defined as income before depreciation and
amortization and extraordinary items less gains on sale of real estate. The
National Association of Real Estate Investment Trusts ("NAREIT") has recently
issued a white paper, which has amended the definition as follows: income
before depreciation and amortization of real estate assets and before
extraordinary items and significant non-recurring events less gains on sale of
real estate. The Trust is complying with this new definition and has
consequently restated funds from operations for prior periods. Funds from
operations does not replace net income as a measure of performance or net cash
provided by operating activities as a measure of liquidity. Rather, funds from
operations has been adopted to provide a
19
consistent measure of operating performance in the industry.
The reconciliation of net income to funds from operations for the nine
months ended September 30 is as follows:
1995 1994
(in thousands)
Net income $17,744 $14,255
Plus: depreciation and amortization
of real estate assets 22,853 19,335
amortization of initial direct
costs of leases 1,832 1,798
loss on sale and nonrecurring
items 545 758
------- -------
Funds from operations $42,974 $36,146
======= =======
Funds from operations increased 19% to $43.0 million in the first nine
months of 1995 from $36.1 million in the first nine months of 1994.
Rental income, which consists of minimum rent, percentage rent and cost
recoveries, increased 11% from $94.2 million in the first nine months of 1994 to
$104.6 million in the first nine months of 1995. If rental income is adjusted
to remove the effect of properties purchased in 1994 and 1995, it increased 4%.
Forty-four percent of the increase is from Congressional Plaza, which was
renovated and retenanted in 1994. Ellisburg Circle, whose redevelopment was
completed in 1994, contributed an additional 17% of the increase.
Minimum rent increased 13% from $73.8 million in the first nine months of
1994 to $83.5 million in the first nine months of 1995. If properties purchased
in 1994 and 1995 are excluded, minimum rent increased $4.6 million or 6.4%. A
major component of this increase is contributions from recently renovated
centers and from the retenanting of some anchor spaces. Cost recoveries, if
adjusted to remove the effect of 1995 and 1994 acquisitions, are down slightly,
primarily due to the decrease in snow removal expense and thus the related
recovery in 1995 as compared to 1994.
Other income which includes items which tend to fluctuate from period to
period, such as utility reimbursements, telephone income, merchant association
dues, lease termination fees, late fees and temporary tenant income, has
increased from $4.1 million in 1994 to $5.3 million in 1995 due principally to a
commission on telephone services, to lease termination fees and to an unexpected
recovery from a bankrupt tenant.
20
Rental expenses have decreased from $27.2 million in the first nine months
of 1994 to $25.1 million in the first nine months of 1995, despite the
acquisition of new properties in 1994 and 1995. The major decrease is in snow
removal expense, but there was also a significant decrease in bad debt expense.
Real estate tax expense has increased because of the new properties and because
of increased assessments at several centers.
Interest expense has increased from $23.5 million during the first nine
months of 1994 to $28.8 million during the comparable period of 1995. Interest
expense on the $125 million of senior notes issued January and April 1995
exceeds the interest saved due to the redemption in April 1994 of $39.8 million
of the convertible subordinated debentures due 2002. The ratio of earnings to
fixed charges was 1.58x for the nine months ended September 30, 1995 and 1.57x
for the comparable period in 1994. The ratio of funds from operations to fixed
charges was 2.39x and 2.44x for the nine months ended September 30, 1995 and
1994, respectively.
During the third quarter of 1994 the Trust wrote off a mortgage note
receivable and accrued interest on the note, totalling $758,000. The note had
been issued in 1982 in connection with the sale by the Trust of a shopping
center.
Depreciation and amortization expense has increased because of the recent
acquisitions and because of depreciation on tenant work and recent property
improvements.
On August 1, 1995 the Trust sold North City Plaza for $1.8 million
resulting in a loss on sale of $545,000.
As a result of the foregoing items, primarily the increases in minimum rent
and other income and the decreases in rental expense, net income rose from $14.3
million in the first nine months of 1994 to $17.7 million in the first nine
months of 1995.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Funds from operations for the quarter ended September 30, 1995 increased
10% to $14.4 million as compared to $13.1 million in the third quarter of 1994.
Rental income, which consists of minimum rent, percentage rent and cost
recoveries, increased 11% from $32.2 million in the third quarter of 1994 to
$35.9 million in the third quarter of 1995. If rental income is adjusted to
remove the effect of properties purchased in 1994 and 1995, it increased 3.8%.
Fifty-three percent of this increase is from Congressional Plaza, which was
renovated and retenanted in 1994. Ellisburg Circle, whose redevelopment was
completed in 1994, contributed an additional
21
23% of the increase.
Minimum rent increased 11% from $25.5 million in the third quarter of 1994 to
$28.4 million in the third quarter of 1995. If properties purchased in 1994 and
1995 are excluded, minimum rent increased 4.3%. A major component of this
increase is contributions from recently renovated centers and from the
retenanting of some spaces. Cost recoveries in the third quarter of 1995 have
increased over the third quarter 1994 recoveries due to the 1994 and 1995
property acquisitions.
Other income has increased from $1.5 million in the third quarter of 1994
to $1.9 million in the third quarter of 1995. The largest components of the
increase were lease termination fees and bad debt recovery from a bankrupt
tenant.
Rental expenses have decreased, despite the acquisition of new properties,
from the third quarter of 1994 to the third quarter of 1995 due to decreases in
bad debt, property payroll and shopping center maintenance costs. Real estate
tax expense has increased because of the new acquisitions and because of
increased assessments at several centers.
Interest expense has increased from $7.7 million in the third quarter of
1994 to $10.1 million during the comparable period of 1995, due to interest on
the $125 million of senior notes issued in 1995.
General and administrative expenses are up $402,000 in the third quarter of
1995 as compared to the same quarter of 1994, primarily because of costs related
to the Trust's unsuccessful efforts to transact a business combination.
Depreciation and amortization expense has increased from the third quarter
of 1994 to the third quarter of 1995 because of the recent acquisitions and
because of depreciation on tenant work and recent property improvements.
On August 1, 1995 the Trust sold North City Shopping Center for a loss of
$545,000. Of this loss, $535,000 was recorded during the second quarter of
1995.
Net income for the third quarter of 1995 was $5.9 million, compared to
1994's $5.0 million, as a result of the foregoing items.
22
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
(10)(a) Non-Exclusive Brokerage Agreement between
Federal Realty Investment Trust and Westport Advisors
Corporation and Jack Alan Guttman dated August 20, 1995..P 24-28
(10)(b) Exclusive Brokerage Agreement between Street
Retail, Inc. and Westport Advisors Corporation and
Jack Alan Guttman dated August 20, 1995...................P 28-33
(27) Financial Data Schedule....................Edgar
filing only
B. Reports on Form 8-K
A Form 8-K, filed with the Commission on August 16, 1995, was filed in
response to Item 7.(c).
A Form 8-K, filed with the Commission on September 22, 1995 was filed in
response to Item 5.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FEDERAL REALTY INVESTMENT TRUST
-------------------------------
(Registrant)
Date: November 13, 1995 Steven J. Guttman
----------------- -----------------
Steven J. Guttman, President
(Chief Executive Officer)
Date: November 13, 1995 Cecily A. Ward
----------------- --------------
Cecily A. Ward
(Principal Accounting Officer)
23
Exhibit 10(a)
NON-EXCLUSIVE BROKERAGE AGREEMENT
---------------------------------
This Agreement is made and entered into on this 20th day of August, 1995 by and
---- ------
between Federal Realty Investment Trust, an unincorporated business trust
organized under the laws of the District of Columbia ("Client") and Westport
Advisors Corporation and Jack Alan Guttman (collectively, "Broker").
In consideration of the mutual covenants set forth in this Agreement, the
parties agree as follows:
1. This Agreement replaces the Exclusive Brokerage Agreement by and between
Client and Broker dated February 6, 1995 ("Prior Agreement") in its entirety.
As of August 21, 1995, the Prior Agreement is terminated and its terms and
provisions, including Section 5, but excluding Section 6, thereof, are null and
void.
2. Client hereby appoints Broker as its non-exclusive real estate broker for
the purchase of strip shopping centers in New York, Connecticut and
Massachusetts. Broker shall perform the duties of a real estate broker;
specifically, Broker shall conduct searches for properties which fit the
criteria established by Client and assist Client with all aspects of the due
diligence process in order to enable Client to evaluate the desirability and
feasibility of acquiring such properties or any interest therein; such
assistance shall include collecting and providing Client with market information
such as demographics, information on competing centers, comparable rentals and
sales and assistance in the appraisal and underwriting of the properties.
Client shall have a right of first refusal, which refusal must be in writing, on
all strip shopping center properties identified or located by Broker before
Broker can identify, offer or show such properties to any other potential
purchaser. Client must respond within a three (3) week or twenty-one (21) days.
3. Broker represents and warrants that:
a) Broker will act in accordance with the highest professional standards
and in compliance with all applicable laws, regulations, codes,
ordinances and orders;
b) There are no obligations, commitments, or impediments of any kind that
will limit or prevent the Broker's performance of its services and
obligations pursuant to this Agreement;
c) The Broker is duly licensed as a real estate broker in each
jurisdiction where such licensure is required;
d) Broker will perform its services in a professional manner and in the
most expeditious and economical manner consistent with the interest of
Client.
e) Broker is an independent contractor and not an employee of Client.
f) Broker solely represents Client in any transaction pursuant to this
Agreement and must disclose Broker's sole representation of Client to
all third parties contacted in connection with this Agreement.
g) Broker shall NOT disclose to any prospective seller or anyone else
information obtained within the confidentiality and trust of the
fiduciary relationship with Client, nor disclose to the prospective
seller or anyone else information similarly obtained from Client
without the consent of Client.
h) Broker shall NOT receive any fees, commissions or other remuneration
other than the Commission (as hereinafter defined) from any seller,
broker or any other source in connection with any property purchased
by Client pursuant to this Agreement
4. Broker's authority is limited to performing the services in accordance with
the terms of this Agreement. Broker does not have any authority to enter into
or execute any agreement for or on behalf of Client. No written proposals,
offers or other information concerning Client shall be distributed without
Client's prior written consent, which may be withheld in Client's sole and
Non-Exclusive Advisory Agreement
Page 2
absolute discretion. Client shall have the right to specify Broker's degree of
involvement, if any, with respect to any negotiation of any contract of sale
("Contract of Sale"). Broker acknowledges that entering into a Contract of Sale
involves negotiation of complex provisions and issues, including business, tax
and operational issues and liabilities relating to a property, and that Client,
therefore, expressly reserves the right to reject any and all proposals for a
Contract of Sale and to approve any and all terms and conditions of any proposed
Contract of Sale as Client sees fit, in Client's sole and absolute discretion.
5. The term of this Agreement ("Term") shall commence on August 21, 1995 and
end at midnight on August 21, 1996, unless sooner terminated in accordance with
the provisions of this Agreement.
6. Client shall pay Broker a commission (the "Commission") equal to .75%
(three-quarters of one-percent) of the aggregate gross sales price of the
properties acquired subject to this Agreement (hereinafter, the "Property").
Notwithstanding the foregoing, in no event shall Broker receive more than two
hundred twenty-five thousand dollars ($225,000.00) total commission in
connection with any single real estate transaction. In no event shall Broker
ever receive any fees, commissions, or other remuneration from any seller,
broker or other person or entity in connection with properties purchased by
Client pursuant to this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the following shall be conditions precedent to
Client's obligation to pay the Commission:
a) The execution and delivery by Client and seller of a Contract of Sale
for one or more Properties acceptable in form and substance to Client,
in Client's sole and absolute discretion; and
b) The actual closing of the sale, including Client's payment of all
monies due at closing, and transfer of title, or other evidence of
ownership, to Client.
Failure of either of these conditions shall preclude any claim for a Commission
by Broker.
Except following the occurrence of an Event of Default as described in Section
10, it is further understood that the Commission shall be paid to Broker if,
(i) within One Hundred Eighty (180) days after the expiration or termination of
the Term, Client enters into a Contract of Sale for one or more Properties
presented by Broker during the Term and named in a written list delivered to
Client by Broker within fifteen (15) days following the expiration of the Term
or the termination of this Agreement, (ii) such purchase is ultimately
consummated, and (iii) the two conditions precedent to Client's obligation to
pay the Commission, as set forth above, have been met. Broker's Commission
shall be the sole compensation paid to Broker and Broker shall not be entitled
to reimbursement for any expenses or any other sums Broker incurs related to or
involving the performance of the services. The Commission shall be paid to
Broker at closing and Client hereby authorizes the attorney or title company
conducting the closing to disburse the Commission to Broker at such closing. The
Commission shall be payable if the transfer or sale is structured as a cash
sale, like-kind exchange, partial sale, joint venture, newly formed partnership
or transfer of stock.
7. In no event shall Client be responsible to pay any persons or entities,
other than Broker, any commissions or other remunerations of any kind in
connection with this Agreement or by virtue of their association with Broker.
Further, Client shall not be obligated to see to the application of the
Commission, if any, due under this Agreement or the payment of any other
remuneration for the benefit of any persons or entities other than Broker, and
no other persons or entity shall be a third party beneficiary of this Agreement.
Broker shall be solely responsible for the direct payment of any commissions or
other remuneration of any kind due to other persons or entities claiming
entitlement to a share of the Commission or any other remuneration under this
Agreement or by virtue of their association with Broker. Broker hereby agrees
to indemnify and hold Client harmless from and against any and all claims,
demands, obligations, liabilities, losses and damages (including, without
limitation, attorney's fees of counsel selected by Client) arising directly or
indirectly out of or in connection with any claim for commissions or other
remuneration of any kind for any person or entity claiming by, through or under
Broker or
Non-Exclusive Advisory Agreement
Page 3
relating in any way to this Agreement, or Broker's actions or failure
to act pursuant to this Agreement; it being understood and agreed that Client's
liability hereunder shall be limited to the payment to Broker of the Commission,
if any, owed under the Agreement. In the event any claims, demands,
obligations, liabilities, losses and/or damages arise in connection with any
claim for commissions, fees or other remuneration, Client may, in its sole and
absolute discretion, withhold Commissions otherwise payable to Broker pending
final resolution and may offset against such Commissions any such claims,
demands obligations, liabilities, losses and or damages. This provision shall
survive any termination of this Agreement.
8. Broker shall obtain, pay for and keep in force at all times during the
performance of work pursuant to this Agreement, the following insurance
coverages placed with insurance companies having an A.M. Best rating of A VI or
better:
Comprehensive General Liability Insurance, with a limit of not less than
one million dollars ($1,000,000) per occurrence, or Commercial General Liability
--
Insurance with limits of not less than one million dollars ($1,000,000) per
occurrence and two million dollars ($2,000,000) aggregate. Client shall be
added as an additional insured. The policy shall provide such additional
insured with a thirty (30) day notice of cancellation, non-renewal or material
change. Any certificates of insurance furnished in accordance with this
Agreement shall specify who has been added as an additional insured and shall
state that the policy has been amended to provide the thirty (30) day advance
notice.
Professional Liability Insurance with a limit of not less than one million
dollars ($1,000,000).
Contractor may meet the limits of liability indicated by means of the use of an
umbrella liability policy. Any general liability policy must be written on an
occurrence basis. Owner shall be furnished with certificates evidencing that
all such insurance specified herein is in force prior to commencement of
services provided pursuant to this Agreement.
9. This Agreement may be terminated by either party upon thirty (30) days'
written notice. In the event of termination by either party, Broker shall be
entitled to receive only that Commission which it has earned pursuant to and in
accordance with Section 6 of this Agreement and Client shall have no further
obligations or liabilities hereunder.
10. Broker's failure or refusal to perform or observe any obligation, covenant,
or condition of this Agreement shall constitute an Event of Default. Should an
Event of Default occur, Client may, at its option, terminate this Agreement
without affecting any other remedy which it may have at law or in equity. Such
termination shall be effective immediately upon Broker's receipt of written
notice from Client. In such event, Broker shall be entitled to receive only
that Commission which it has already earned pursuant to and in accordance with
Section 6 of this Agreement, less any and all damages, losses, claims, costs and
expenses incurred or suffered by Client as a result of Broker's failure or
refusal to perform and Client shall have no further obligations or liabilities
hereunder. Broker will not be entitled to receive any Commissions on properties
that are purchased by Client, unless the purchase agreement is fully executed
before the date of occurrence of an Event of Default and the conditions
precedent to the Client's obligation to pay a Commission set forth in Section 6
have been met.
11. The name, "Federal Realty Investment Trust", refers to the Trustees, as
trustees, but not individually or personally, under a Third Amended and Restated
Declaration of Trust on file in the office of the Recorder of Deeds of the
District of Columbia, which Declaration provides that neither the shareholders
nor the Trustees, nor any officer, employee, representative or agent of Federal
Realty Investment Trust shall be personally liable for the satisfaction of
obligations of any nature whatsoever of Federal Realty Investment Trust.
Accordingly, and in addition to the other limitations on liability set forth
herein, Broker hereby agrees to look solely to Federal Realty Investment Trust's
trust property for the satisfaction of any claim arising from this Agreement and
shall not seek to impose personal liability on any shareholder, Trustee,
officer, employee, representative or agent of Federal Realty Investment Trust.
A similar limitation on liability shall be inserted in each document executed by
Federal Realty Investment Trust (if any) pursuant to this Agreement.
Non-Exclusive Advisory Agreement
Page 4
12. Whenever any demand, request, approval consent or notice ("Notice") shall
or may be given by one party to the other, Notice shall be addressed to the
parties at their respective addresses as set forth below and delivered by (i)
hand, (ii) facsimile, (iii) a nationally recognized overnight express courier,
or (iv) registered or certified mail return receipt requested. The date of
actual receipt shall be deemed the date of service of Notice. In the event an
addressee refuses to accept delivery, however, then Notice shall be deemed to
have been served on either (i) the date hand delivery is refused, (ii) the next
business day in the case of delivery by overnight courier, or (iii) three (3)
business days after mailing the notice in the case of registered or certified
mail. Either party may, at any time, change its Notice address by giving the
other party Notice, in accordance with the above, stating the change and setting
forth the new address.
Client: Robert S. Wennett
Senior Vice President, Acquisitions
Federal Realty Investment Trust
4800 Hampden Lane, Suite 500
Bethesda, Maryland 20814
Broker: Westport Advisors Corporation
25 Sylvan Road South, Building F
Westport, Connecticut 06880
Attn: Jack Alan Guttman
13. This Agreement contains the entire agreement between Client and Broker, it
supersedes any prior agreements or understandings and no oral statements or
prior written matter not specifically incorporated in this Agreement shall be of
any force and effect. No variation, modification, or changes of this Agreement
shall be binding on either party to the Agreement unless set forth in a document
executed by these parties or a duly authorized agent, officer, or representative
hereof.
14. Neither Client nor Broker shall file or record any instrument or document
relative to this Agreement in any public records except as may be required by
the federal securities laws.
15. Notice: The amount or rate of real estate commissions is not fixed by law.
They are set by each Broker individually and may be negotiable between the
Client and the Broker.
16. This Agreement shall be subject to Section 46a-64 of the Connecticut
General Statutes, as amended, and governed by and construed in accordance with
the laws of the State of Connecticut.
17. The heirs, transferees, successors, and assigns of the parties hereof shall
be duly bound by the provisions hereof, provided Broker may not assign or
otherwise transfer its right or obligation hereunder.
18. The terms of the Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland.
19. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and shall together constitute one and the same
instrument.
Non-Exclusive Advisory Agreement
Page 5
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above stated.
CLIENT:
FEDERAL REALTY INVESTMENT TRUST
By: /s/ Hal A. Vasvari
-------------------
Hal A. Vasvari
Chief Operating Officer
BROKER:
WESTPORT ADVISORS CORPORATION
By: /s/ Jack Alan Guttman
----------------------
Jack Alan Guttman
President
JACK ALAN GUTTMAN
/s/Jack Alan Guttman
--------------------
Exhibit 10(b)
EXCLUSIVE BROKERAGE AGREEMENT
-----------------------------
This Agreement is made and entered into on this 20th day of August, 1995 by and
between Street Retail, Inc., a Maryland corporation ("Client"), and Westport
Advisors Corporation and Jack Alan Guttman (collectively, "Broker").
In consideration of the mutual covenants set forth in this Agreement, the
parties agree as follows:
1. This Agreement replaces the Exclusive Brokerage Agreement by and between
Client and Broker dated February 6, 1995 ("Prior Agreement") in its entirety.
As of August 21, 1995, the Prior Agreement is terminated and its terms and
provisions, including Section 5, but excluding Section 6, thereof, are null and
void.
2. Client hereby appoints Broker as its exclusive real estate broker for the
purchase of urban retail buildings (i.e. not traditional "strip" shopping
centers or shopping malls) located in Connecticut and Westchester County, New
York (the "Metro Area"). As its exclusive real estate broker for the purchase
of urban retail buildings in the Metro Area, Broker shall not identify, locate,
or assist with the purchase or sale of any urban retail buildings with any other
person, client or entity other than Client. Broker shall perform the duties of
a real estate broker; specifically, Broker shall conduct searches for properties
which fit the criteria established by Client and assist Client with all aspects
of the due diligence process in order to enable Client to evaluate the
desirability and feasibility of acquiring such properties or any interest
therein; such assistance shall include collecting and providing Client with
market information such as demographics, information on competing properties,
comparable rentals and sales and assistance in the appraisal and underwriting of
the properties.
3. Broker represents and warrants that:
a) Broker will act in accordance with the highest professional standards
of the industry and in compliance with all applicable laws,
regulations, codes, ordinances and orders.
b) There are no obligations, commitments, or impediments of any kind that
will limit or prevent the Broker's performance of its services and
obligations pursuant to this Agreement.
c) The Broker is duly licensed as a real estate broker in the States of
Connecticut and New York.
d) Broker will perform its services in a professional manner and in the
most expeditious and economical manner consistent with the interest of
Client.
e) Broker is an independent contractor and not an employee of Client.
f) Broker solely represents Client in any transaction pursuant to this
Agreement and must disclose Broker's sole representation of Client to
all third parties contacted in connection with this Agreement.
g) Broker shall NOT disclose to any prospective seller or anyone else
information obtained within the confidentiality and trust of the
fiduciary relationship with Client, nor disclose to the prospective
seller or anyone else information similarly obtained from Client
without the consent of Client.
h) Broker shall NOT receive any fees, commissions or other remuneration
other than the Commission (as hereinafter defined) from any seller,
broker or any other source in connection with any property purchased
by Client pursuant to this Agreement
4. Broker's authority is limited to performing the services in accordance with
the terms of this Agreement. Broker does not have any authority to enter into
or execute any agreement for or on behalf of Client. No written proposals,
offers or other information concerning Client shall be distributed without
Client's prior written consent, which may be withheld in Client's sole and
absolute discretion. Client shall have the right to specify Broker's degree of
involvement, if
Exclusive Brokerage Agreement
Page 2
any, with respect to any negotiation of any contract of sale ("Contract of
Sale"). Broker acknowledges that entering into a Contract of Sale involves
negotiation of complex provisions and issues, including business, tax and
operational issues and liabilities relating to a property, and that Client,
therefore, expressly reserves the right to reject any and all proposals for a
Contract of Sale and to approve any and all terms and conditions of any proposed
Contract of Sale as Client sees fit, in Client's sole and absolute discretion.
5. The term of this Agreement ("Term") shall commence on August 21, 1995 and
end at midnight on August 21, 1996, unless sooner terminated in accordance with
the provisions of this Agreement.
6. Client shall pay Broker a commission (the "Commission") equal to .75%
(three-quarters of one-percent) of the first twenty million dollars
($20,000,000) of the aggregate gross sales price of the properties acquired
subject to this Agreement (i.e. each urban retail building, or buildings located
in the Metro Area) (hereinafter, the "Properties") and 1% (one percent) of the
aggregate gross sales price of the Properties acquired subject to this Agreement
thereafter. Notwithstanding the foregoing, in no event shall Broker receive more
than two hundred twenty-five thousand dollars ($225,000.00) total commission in
connection with any single real estate transaction, regardless of the number of
individual properties contained in any such transaction. Notwithstanding
anything to the contrary contained in this Agreement, the following shall be
conditions precedent to Client's obligation to pay the Commission:
a) The execution and delivery by Client and seller of a Contract of Sale
for one or more Properties acceptable in form and substance to Client,
in Client's sole and absolute discretion; and
b) The actual closing of the sale, including Client's payment of all
monies due at closing, and transfer of title, or other evidence of
ownership, to Client.
Failure of either of these conditions shall preclude any claim for a Commission
by Broker. In no event shall Broker ever receive any fees, commissions, or
other remuneration from any seller, broker or other person or entity in
connection with properties purchased by Client pursuant to this Agreement.
With respect to the properties listed in Addendum A, in the event that (i) the
conditions precedent to Client's obligation to pay Broker a Commission, as set
forth above, are met prior to December 31, 1995, (ii) the individual/entities
listed on Addendum A ("Addendum A Broker") execute a brokerage agreement with
Client in a form satisfactory to Client, in Client's sole and absolute
discretion, prior to the execution of a purchase contract relating to the
subject property, (iii) the Addendum A Broker is duly licensed as a real estate
broker in the State of Connecticut, and (iv) Broker is not receiving any portion
of the fees being paid to any Addendum A Broker, Client shall pay brokerage
fees not to exceed the amounts referenced in Addendum A ("Addendum A Fees") in
addition to the Commission to be paid to Broker in accordance with this
Agreement, but, in no event, shall Client ever pay more than 1.5% total
commissions on the aggregate gross sale price for each such transaction. In no
event, however, will Client be responsible for the payment of any other fees or
expenses in connection with the purchase of any of the properties listed on
Addendum A.
With respect to the properties included on Addendum A after December 31, 1995
and any other properties purchased pursuant to this Agreement, in the event that
there is a real estate broker cooperating with Broker in connection with this
Agreement ("Cooperating Broker"), Client may, in its sole discretion, agree to
pay up to 0.5% of the aggregate gross sales price ("Cooperation Fee") to the
cooperating real estate broker provided that (i) the conditions precedent to
Client's obligation to pay Broker, as set forth above, have been met, (ii) the
Cooperating Broker executes a brokerage agreement in a form satisfactory to
Client, in its sole and absolute discretion, prior to the execution by Client of
a contract to purchase the property in connection with which the Cooperation Fee
may be paid, (iii) the Cooperating Broker is duly licensed as a real estate
broker in the jurisdiction in which the property is located, (iv) the
Cooperating Broker is not receiving any other fees, commissions or other
remuneration in connection with the transaction for which Cooperating Broker
otherwise could be eligible to receive a Cooperation Fee, and (iv) Broker is not
receiving any portion of the Cooperation Fee. In no event, however, shall
Client pay more than 1% total commissions with respect to
Exclusive Brokerage Agreement
Page 3
properties where Broker is earning a .75% commission or 1.25% total commissions
with respect to properties where Broker is earning a 1% commission as described
in Section 4, above.
Except following the occurrence of an Event of Default as described in Section
10, it is further understood that the Commission shall be paid to Broker if, (i)
within One Hundred Eighty (180) days after the expiration or termination of the
Term, Client enters into a Contract of Sale for one or more Properties presented
by Broker during the Term and named in a written list delivered to Client by
Broker within fifteen (15) days following the expiration of the Term or the
termination of this Agreement, (ii) such purchase is ultimately consummated, and
(iii) the two conditions precedent to Client's obligation to pay the Commission,
as set forth above, have been met. Broker's Commission shall be the sole
compensation paid to Broker and Broker shall not be entitled to reimbursement
for any expenses or any other sums Broker incurs related to or involving the
performance of the services. The Commission shall be paid to Broker at closing
and Client hereby authorizes the attorney or title company conducting the
closing to disburse the Commission to Broker at such closing. The Commission
shall be payable if the transfer or sale is structured as a cash sale, like-kind
exchange, partial sale, joint venture, newly formed partnership or transfer of
stock.
7. In no event shall Client be responsible to pay any persons or entities,
other than Broker, any commissions or other remunerations of any kind in
connection with this Agreement or by virtue of their association with Broker
except that, pursuant to Section 6, above, Client may, in its sole and absolute
discretion, pay Cooperation Fees to Cooperating Brokers and Addendum A Fees to
Addendum A Brokers. Further, Client shall not be obligated to see to the
application of the Commission, if any, due under this Agreement or the payment
of any other remuneration for the benefit of any persons or entities other than
Broker, and, in its sole and absolute discretion, Cooperating Brokers and
Addendum A Brokers, and no other persons or entity shall be a third party
beneficiary of this Agreement. Broker shall be solely responsible for the
direct payment of any commissions or other remuneration of any kind, except
payment of Cooperation Fees and Addendum A fees, if any, due to other persons or
entities claiming entitlement to a share of the Commission or any other
remuneration under this Agreement or by virtue of their association with Broker.
Broker hereby agrees to indemnify and hold Client harmless from and against any
and all claims, demands, obligations, liabilities, losses and damages
(including, without limitation, attorney's fees of counsel selected by Client)
arising directly or indirectly out of or in connection with any claim for
commissions or other remuneration of any kind for any person or entity claiming
by, through or under Broker or relating in any way to this Agreement, or
Broker's actions or failure to act pursuant to this Agreement; it being
understood and agreed that Client's liability hereunder shall be limited to the
payment to Broker of the Commission, if any, owed under the Agreement. In the
event any claims, demands, obligations, liabilities, losses and/or damages arise
in connection with any claim for commissions, fees or other remuneration, Client
may, in its sole and absolute discretion, withhold Commissions otherwise payable
to Broker pending final resolution and may offset against such Commissions any
such claims, demands obligations, liabilities, losses and or damages. This
provision shall survive any termination of this Agreement.
8. Broker shall obtain, pay for and keep in force at all times during the
performance of work pursuant to this Agreement, the following insurance
coverages placed with insurance companies having an A.M. Best rating of A VI or
better:
Comprehensive General Liability Insurance, with limit of not less than one
million dollars ($1,000,000) per occurrence, or Commercial General Liability
--
Insurance with limits of not less than one million dollars ($1,000,000) per
occurrence and two million dollars ($2,000,000) aggregate. Client shall be
added as an additional insured. The policy shall provide such additional
insured with a thirty (30) day notice of cancellation, non-renewal or material
change. Any certificates of insurance furnished in accordance with this
Agreement shall specify who has been added as an additional insured and shall
state that the policy has been amended to provide the thirty (30) day advance
notice.
Professional Liability Insurance with a limit of not less than one million
dollars ($1,000,000).
Contractor may meet the limits of liability indicated by means of the use of an
umbrella liability policy. Any general liability policy must be written on an
occurrence basis. Owner shall be
Exclusive Brokerage Agreement
Page 4
furnished with certificates evidencing that all such insurance specified herein
is in force prior to commencement of services provided pursuant to this
Agreement.
9. This Agreement may be terminated by either party upon thirty (30) days'
written notice. In the event of termination by either party, Broker shall be
entitled to receive only that Commission which it has earned pursuant to and in
accordance with Section 6 of this Agreement and Client shall have no further
obligations or liabilities hereunder.
10. Broker's failure or refusal to perform or observe any obligation, covenant,
or condition of this Agreement shall constitute an Event of Default. Should an
Event of Default occur, Client may, at its option, terminate this Agreement
without affecting any other remedy which it may have at law or in equity. Such
termination shall be effective immediately upon Broker's receipt of written
notice from Client. In such event, Broker shall be entitled to receive only
that Commission which it has already earned pursuant to and in accordance with
Section 6 of this Agreement, less any and all damages, losses, claims, costs and
expenses incurred or suffered by Client as a result of Broker's failure or
refusal to perform and Client shall have no further obligations or liabilities
hereunder. Broker will not be entitled to receive any Commissions on properties
that are purchased by Client, unless the purchase agreement is fully executed
before the date of occurrence of an Event of Default and the conditions
precedent to the Client's obligation to pay a Commission set forth in Section 6
have been met.
11. Client, its directors, employees, officers, agents and shareholders
shall not be personally liable under this Agreement and Broker hereby agrees to
look solely to Client's property, real, personal or otherwise, tangible or
intangible, for payment of any claim hereunder.
A similar limitation on liability shall be inserted in each document executed by
Street Retail, Inc. (if any) pursuant to this Agreement.
12. Whenever any demand, request, approval consent or notice ("Notice") shall
or may be given by one party to the other, Notice shall be addressed to the
parties at their respective addresses as set forth below and delivered by (i)
hand, (ii) facsimile, (iii) a nationally recognized overnight express courier,
or (iv) registered or certified mail return receipt requested. The date of
actual receipt shall be deemed the date of service of Notice. In the event an
addressee refuses to accept delivery, however, then Notice shall be deemed to
have been served on either (i) the date hand delivery is refused, (ii) the next
business day in the case of delivery by overnight courier, or (iii) three (3)
business days after mailing the notice in the case of registered or certified
mail. Either party may, at any time, change its Notice address by giving the
other party Notice, in accordance with the above, stating the change and setting
forth the new address.
Client: Ron D. Kaplan
Vice President
Street Retail, Inc.
4800 Hampden Lane, Suite 500
Bethesda, Maryland 20814
with a copy to:
Street Retail, Inc.
4800 Hampden Lane, Suite 500
Bethesda, Maryland 20814
Attn: Secretary
Broker: Westport Advisors Corporation
25 Sylvan Road South, Building F
Westport, Connecticut 06880
Attn: Jack Alan Guttman, President
13. This Agreement contains the entire agreement between Client and Broker,
supersedes any prior agreements or understandings, and no oral statements or
prior written matter not specifically incorporated in this Agreement
Exclusive Brokerage Agreement
Page 5
unless set forth in a document executed by these parties or a duly authorized
agent, officer, or representative hereof
14. Neither Client nor Broker shall file or record any instrument or document
relative to this Agreement in any public records except as may be required by
the federal securities laws.
15. Notice: The amount or rate of real estate commissions is not fixed by law.
They are set by each Broker individually and may be negotiable between the
Client and the Broker.
16. This Agreement shall be subject to Section 46a-64 of the Connecticut
General Statutes, as amended, and governed by and construed in accordance with
the laws of the State of Connecticut.
17. The heirs, transferees, successors, and assigns of the parties hereof shall
be duly bound by the provisions hereof, provided Broker may not assign or
otherwise transfer its right or obligation hereunder.
18. The terms of the Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland.
19. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above stated.
CLIENT:
STREET RETAIL, INC.
By: /s/ Ron D. Kaplan
________________________________
Ron D. Kaplan
Vice President
BROKER:
WESTPORT ADVISORS CORPORATION
By: /s/ Jack Alan Guttman
_______________________________
Jack Alan Guttman
President
JACK ALAN GUTTMAN
/s/ Jack Alan Guttman
__________________________________
5
1,000
9-MOS
DEC-31-1995
SEP-30-1995
$3,431
3,744
14,340
0
0
0
962,473
(182,737)
842,707
0
468,999
507,815
0
0
(173,580)
842,707
0
109,840
0
35,763
0
0
28,814
17,744
0
0
0
0
0
17,744
.56
0
Current assets and current liabilities are not listed since Federal Realty
does not prepare a classified balance sheet.
