Federal Realty Investment Trust Announces Third Quarter 2010 Operating Results

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Nov 03, 2010, 04:30 ET

ROCKVILLE, Md., Nov. 3, 2010 /PRNewswire-FirstCall/ -- Federal Realty Investment Trust (NYSE: FRT) today reported operating results for its third quarter ended September 30, 2010.

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Financial Results

In the third quarter 2010, Federal Realty generated funds from operations available for common shareholders (FFO) of $58.8 million or $0.95 per diluted share. This compares to FFO of $55.6 million, or $0.92 per diluted share, in third quarter 2009. For the nine months ended September 30, 2010, Federal Realty reported FFO of $177.0 million, or $2.87 per diluted share, compared to $151.0 million, or $2.53 per diluted share for the same nine-month period in 2009.

Net income available for common shareholders was $29.5 million and earnings per diluted share was $0.48 for the quarter ended September 30, 2010 versus $27.3 million and $0.45, respectively, for third quarter 2009. Year-to-date, Federal Realty reported net income available for common shareholders of $89.6 million and earnings per diluted share of $1.45. This compares to net income available for common shareholders of $65.9 million and earnings per diluted share of $1.10 for the nine months ended September 30, 2009.

2009 results include a litigation provision related to a lawsuit involving a property adjacent to Santana Row. Excluding this litigation provision, FFO was $172.0 million, or $2.88 per diluted share for the nine months ended September 30, 2009; net income available for common shareholders was $87.0 million and earnings per diluted share was $1.46.

FFO is a non-GAAP supplemental earnings measure which the Trust considers meaningful in measuring its operating performance. A reconciliation of FFO to net income is attached to this press release.

Portfolio Results

For third quarter 2010, same-center property operating income was flat compared to third quarter 2009. When redevelopment and expansion properties are included in same-center results, property operating income for third quarter 2010 decreased -0.9% compared to third quarter 2009. For the nine months ended September 30, 2010, same-center property operating income increased 2.2%, and increased 2.6% including redevelopment and expansion properties.

The overall portfolio was 93.9% leased as of September 30, 2010, compared to 94.2% on June 30, 2010 and 94.2% on September 30, 2009. Federal Realty's same-center portfolio was 94.4% leased on September 30, 2010, compared to 94.7% on June 30, 2010 and 94.4% on September 30, 2009.

During the third quarter of 2010, Federal Realty signed 77 leases for 396,000 square feet of retail space. On a comparable space basis (i.e., spaces for which there was a former tenant), the Trust leased 349,000 square feet at an average cash-basis contractual rent increase per square foot (i.e., excluding the impact of straight-line rents) of 6%. The average contractual rent on this comparable space for the first year of the new leases is $25.17 per square foot, compared to the average contractual rent of $23.83 per square foot for the last year of the prior leases. The previous average contractual rent was calculated by including both the minimum rent and any percentage rent actually paid during the last year of the lease term for the re-leased space. On a GAAP basis (i.e., including the impact of straight-line rents), rent increases per square foot for comparable retail space averaged 17% for third quarter 2010. As of September 30, 2010, Federal Realty's average contractual, cash basis minimum rent for retail and commercial space in its portfolio was $22.64 per square foot.

"Our ability to produce consistent results in a continuously challenging economic environment is a true reflection of the stability of our company," said Don Wood, president and chief executive officer of Federal Realty Investment Trust. "We continue to focus on a low-risk business strategy of producing growth through the smart leasing of our assets, completion of redevelopment projects at excellent risk-adjusted returns, and sourcing acquisitions in our core markets."

Regular Quarterly Dividends

Federal Realty also announced today that its Board of Trustees declared a regular quarterly cash dividend of $0.67 per share on its common shares, resulting in an indicated annual rate of $2.68 per share. The regular common dividend will be payable in cash on January 18, 2011 to common shareholders of record on January 3, 2011.

Guidance

Federal Realty increased its guidance for 2010 FFO per diluted share to a range of $3.85 to $3.87 and 2010 earnings per diluted share guidance of $1.96 to $1.98. The Trust also established guidance for 2011 FFO per diluted share at a range of $3.95 to $4.02 and 2011 earnings per diluted share guidance of $2.02 to $2.09. 2011 guidance reflects record expectations for funds from operations per share.

Primary assumptions in our 2011 FFO per diluted share guidance include:

No material changes in portfolio occupancy,
A $5 million decrease in lease termination fees, principally driven by a significant decline at Flourtown Shopping Center,
Same-store property operating income growth of 1%, despite the significant decline in lease termination fees, and
No FFO impact associated with 2011 acquisition activity.

Summary of Other Quarterly Activities and Recent Developments

August 16, 2010 – Acquired Huntington Square on Long Island in East Northport, New York for $17.6 million. Huntington Square is a 268,000 square foot community center comprised of 74,000 square feet of multi-tenant gross leasable area leased to national retailers such as Barnes & Noble, Brinker International, Lane Bryant and Chase and shadow-anchored by a 194,000 square foot Sears department store.

Conference Call Information

Federal Realty's management team will present an in-depth discussion of the Trust's operating performance on its third quarter 2010 earnings conference call, which is scheduled for November 4, 2010, at 1:00 p.m. Eastern Daylight Time. To participate, please call (866) 202-1971 five to ten minutes prior to the call start time and use the passcode FRT EARNINGS (required). Federal Realty will also provide an online webcast on the Company's web site, www.federalrealty.com, which will remain available for 30 days following the call. A telephone recording of the call will also be available through December 3, 2010, by dialing (888) 286-8010 and using the passcode 46509598.

About Federal Realty

Federal Realty Investment Trust is an equity real estate investment trust specializing in the ownership, management and redevelopment of high quality retail assets. Federal Realty's portfolio (excluding joint venture properties) contains approximately 18.2 million square feet located primarily in strategically selected metropolitan markets in the Northeast, Mid-Atlantic, and California. In addition, the Trust has an ownership interest in approximately 1.0 million square feet of retail space through a joint venture in which the Trust has a 30% interest. Our operating portfolio (excluding joint venture properties) was 93.9% leased to national, regional, and local retailers as of September 30, 2010, with no single tenant accounting for more than approximately 2.7% of annualized base rent. Federal Realty has paid quarterly dividends to its shareholders continuously since its founding in 1962, and has increased its dividend rate for 43 consecutive years, the longest record in the REIT industry. Federal Realty is an S&P MidCap 400 company and its shares are traded on the NYSE under the symbol FRT. For more information, please visit www.federalrealty.com.

Safe Harbor Language

Certain matters discussed within this press release may be deemed to be forward-looking statements within the meaning of the federal securities laws. Although Federal Realty believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. These factors include, but are not limited to, the risk factors described in our Annual Report on Form 10-K filed on February 17, 2010, and include the following:

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;
risks that the number of properties we acquire for our own account, and therefore the amount of capital we invest in acquisitions, may be impacted by our real estate partnerships;
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 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, such as our ability to consummate additional financings or obtain replacement financing on terms which are acceptable to us, our ability to meet existing financial covenants and the limitations imposed on our operations by those covenants, and the possibility of increases in interest rates that would result in increased interest expense; and
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.

Given these uncertainties, readers are cautioned not to place undue reliance on any forward-looking statements that we make, including those in this press release. Except as may be required by law, we make no promise to update any of the forward-looking statements as a result of new information, future events or otherwise. You should carefully review the risks and risk factors included in our Annual Report on Form 10-K filed February 17, 2010.

Federal Realty Investment Trust
Summarized Balance Sheets
September 30, 2010



	September 30,	December 31,
	2010	2009
	(in thousands)
ASSETS	(unaudited)

Real estate, at cost
Operating (including $97,265 and $68,643 of consolidated variable interest entities,
respectively)	$ 3,688,805	$ 3,626,476
Construction-in-progress	158,060	132,758
	3,846,865	3,759,234
Less accumulated depreciation and amortization (including $3,803 and $3,053 of
consolidated variable interest entities, respectively)	(1,011,975)	(938,087)
Net real estate	2,834,890	2,821,147

Cash and cash equivalents	9,174	135,389
Accounts and notes receivable, net	74,443	72,191
Mortgage notes receivable, net	43,828	48,336
Investment in real estate partnerships	51,769	35,633
Prepaid expenses and other assets	113,055	109,613
TOTAL ASSETS	$ 3,127,159	$ 3,222,309

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Mortgages payable (including $22,946 and $23,417 of consolidated variable interest
entities, respectively) and capital lease obligations	$ 593,395	$ 601,884
Notes payable	47,940	261,745
Senior notes and debentures	1,079,854	930,219
Accounts payable and other liabilities	219,094	219,398
Total liabilities	1,940,283	2,013,246

Shareholders' equity
Preferred shares	9,997	9,997
Common shares and other shareholders' equity	1,145,499	1,167,340
Total shareholders' equity of the Trust	1,155,496	1,177,337
Noncontrolling interests	31,380	31,726
Total shareholders' equity	1,186,876	1,209,063
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 3,127,159	$ 3,222,309

Federal Realty Investment Trust
Summarized Income Statements
September 30, 2010


	Three months ended September 30,		Nine months ended September 30,
	2010	2009	2010	2009
	(in thousands, except per share data)
	(unaudited)
Revenue
Rental income	$ 130,144	$ 126,169	$ 391,892	$ 379,465
Other property income	2,825	3,714	11,245	9,258
Mortgage interest income	1,095	1,109	3,232	3,683
Total revenue	134,064	130,992	406,369	392,406

Expenses
Rental expenses	27,140	24,367	82,724	78,144
Real estate taxes	15,263	14,485	45,272	43,138
General and administrative	5,844	5,749	17,062	16,170
Litigation provision	60	330	347	21,087
Depreciation and amortization	29,591	28,410	89,701	86,635
Total operating expenses	77,898	73,341	235,106	245,174
Operating income	56,166	57,651	171,263	147,232

Other interest income	18	924	233	1,274
Interest expense	(25,299)	(30,209)	(76,679)	(79,622)
Early extinguishment of debt	-	-	(2,801)	(968)
Income from real estate partnerships	125	473	506	1,074
Income from continuing operations	31,010	28,839	92,522	68,990

Discontinued operations
Discontinued operations - income	-	-	-	218
Discontinued operations - gain on sale of real estate	-	-	1,000	1,298
Results from discontinued operations	-	-	1,000	1,516
Income before gain on sale of real estate	31,010	28,839	93,522	70,506

Gain on sale of real estate	-	-	410	-
Net income	31,010	28,839	93,932	70,506

Net income attributable to noncontrolling interests	(1,370)	(1,406)	(3,958)	(4,172)
Net income attributable to the Trust	29,640	27,433	89,974	66,334

Dividends on preferred shares	(136)	(136)	(406)	(406)
Net income available for common shareholders	$ 29,504	$ 27,297	$ 89,568	$ 65,928


EARNINGS PER COMMON SHARE, BASIC
Continuing operations	$ 0.48	$ 0.45	$ 1.43	$ 1.08
Discontinued operations	-	-	0.02	0.03
Gain on sale of real estate	-	-	0.01	-
	$ 0.48	$ 0.45	$ 1.46	$ 1.11

Weighted average number of common shares, basic	61,215	60,016	61,158	59,264

EARNINGS PER COMMON SHARE, DILUTED
Continuing operations	$ 0.48	$ 0.45	$ 1.42	$ 1.07
Discontinued operations	-	-	0.02	0.03
Gain on sale of real estate	-	-	0.01	-
	$ 0.48	$ 0.45	$ 1.45	$ 1.10

Weighted average number of common shares, diluted	61,359	60,140	61,297	59,387

Federal Realty Investment Trust
Funds From Operations
September 30, 2010



		Three months ended September 30,		Nine months ended September 30,
		2010	2009	2010	2009
Funds from Operations available for common		(in thousands, except per share data)
shareholders (FFO) (1)
Net income (2)		$ 31,010	$ 28,839	$ 93,932	$ 70,506
Net income attributable to noncontrolling interests		(1,370)	(1,406)	(3,958)	(4,172)
Gain on sale of real estate		-	-	(1,410)	(1,298)
Depreciation and amortization of real estate assets		26,491	25,682	80,375	77,681
Amortization of initial direct costs of leases		2,429	2,196	7,226	7,378
Depreciation of joint venture real estate assets		368	355	1,064	1,046
Funds from operations		58,928	55,666	177,229	151,141
Dividends on preferred shares		(136)	(136)	(406)	(406)
Income attributable to operating partnership units		247	245	736	729
Income attributable to unvested shares		(197)	(180)	(590)	(494)
FFO		58,842	55,595	176,969	150,970
Litigation provision, net of allocation to unvested shares		59	329	346	21,018
FFO excluding litigation provision		$ 58,901	$ 55,924	$ 177,315	$ 171,988

FFO per diluted share		$ 0.95	$ 0.92	$ 2.87	$ 2.53
Litigation provision per diluted share		-	-	0.01	0.35
FFO per diluted share excluding litigation provision		$ 0.95	$ 0.92	$ 2.88	$ 2.88

	Weighted average number of common shares, diluted	61,729	60,511	61,667	59,759


Notes:
(1) See Glossary of Terms.
(2) Net income includes certain costs related to the litigation and appeal process over a parcel of land adjacent to Santana Row; net income for the nine months ended September 30, 2009 also includes a $20.6 million charge for increasing the accrual for such litigation matter. We believe FFO excluding this litigation provision provides a more meaningful evaluation of operations, and therefore, have included FFO and FFO per share excluding the related charges.

Federal Realty Investment Trust
Reconciliation of Net Income to FFO Guidance
September 30, 2010


	2010 Guidance
	(Dollars in millions except
	per share amounts) (1)
Funds from Operations available for common shareholders (FFO)
Net income	$ 126	$ 127
Net income attributable to noncontrolling interests	(5)	(5)
Gain on sale of real estate	(1)	(1)
Depreciation and amortization of real estate & joint venture real estate assets	109	109
Amortization of initial direct costs of leases	9	9
Funds from operations	237	239
Dividends on preferred shares	(1)	(1)
Income attributable to operating partnership units	1	1
Income attributable to unvested shares	(1)	(1)
FFO	237	238
Litigation provision (2)	1	1
FFO excluding litigation provision	$ 238	$ 239

Weighted average number of common shares, diluted	61.7	61.7

FFO per diluted share	$ 3.84	$ 3.86
Litigation provision	0.01	0.01
FFO per diluted share excluding litigation provision	$ 3.85	$ 3.87


	2011 Guidance
	(Dollars in millions except
	per share amounts) (1)
Funds from Operations available for common shareholders (FFO)
Net income	$ 131	$ 135
Net income attributable to noncontrolling interests	(5)	(5)
Gain on sale of real estate	-	-
Depreciation and amortization of real estate & joint venture real estate assets	111	111
Amortization of initial direct costs of leases	9	9
Funds from operations	245	250
Dividends on preferred shares	(1)	(1)
Income attributable to operating partnership units	1	1
Income attributable to unvested shares	(1)	(1)
FFO	$ 245	$ 249

Weighted average number of common shares, diluted	61.9	61.9

FFO per diluted share	$ 3.95	$ 4.02


Notes:
(1) Individual items may not add up to total due to rounding.
(2) Amount represents a charge for litigation regarding a parcel of land located adjacent to Santana Row as well as other costs related to the litigation and appeal process.

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