SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: March 31,2002
------------------------------------
Commission File No. 1-07533
---------------------------
FEDERAL REALTY INVESTMENT TRUST
-------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-0782497
---------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1626 East Jefferson Street, Rockville, Maryland 20852-4041
---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(301)998-8100
------------
(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 May 2, 2002
- ------------------------------ --------------------------
Common Shares of Beneficial Interest 40,765,216
This report, including exhibits, contains 39 pages.
FEDERAL REALTY INVESTMENT TRUST
S.E.C. FORM 10-Q
March 31, 2002
I N D E X
PART I. FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheets
March 31, 2002 (unaudited) and
December 31, 2001 (audited) 4
Consolidated Statements of Operations (unaudited)
Three months ended March 31, 2002 and 2001 5
Consolidated Statements
of Shareholders' Equity (unaudited)
Three months ended March 31, 2002 and 2001 6
Consolidated Statements of Cash Flows (unaudited)
Three months ended March 31, 2002 and 2001 7
Notes to Financial Statements 8-14
Management's Discussion and Analysis of 15-25
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 26-28
2
FEDERAL REALTY INVESTMENT TRUST
S.E.C. FORM 10-Q
March 31, 2002
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 present a fair statement of the results for the
interim periods presented.
3
Federal Realty Investment Trust
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2002 2001
(unaudited)
ASSETS (in thousands, except share data)
Real estate, at cost
Operating $ 1,770,455 $ 1,782,318
Development 356,450 321,986
Held for sale 18,141 -
----------- -----------
2,145,046 2,104,304
Less accumulated depreciation and amortization (410,295) (395,767)
----------- -----------
1,734,751 1,708,537
Other Assets
Cash 17,325 17,563
Mortgage notes receivable 48,661 35,607
Accounts and notes receivable 17,095 18,580
Prepaid expenses and other assets, principally
property taxes and lease commissions 50,802 50,739
Debt issue costs, net of accumulated amortization
of $5,227 and $4,840, respectively 6,565 6,952
----------- -----------
$ 1,875,199 $ 1,837,978
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Obligations under capital leases $ 99,663 $ 100,293
Mortgages and construction loans payable 381,338 350,043
Notes payable 185,801 174,843
Accounts payable and accrued expenses 68,093 64,014
Dividends payable 22,702 21,664
Security deposits 6,234 6,026
Prepaid rents 8,938 10,400
Senior notes and debentures 410,000 410,000
5 1/4% Convertible subordinated debentures 75,289 75,289
Investors' interest in consolidated assets 33,803 33,018
Commitments and contingencies
Shareholders' equity
Preferred stock, authorized 15,000,000 shares, $.01 par
7.95% Series A Cumulative Redeemable Preferred Shares, (stated at
liquidation preference $25 per share), 4,000,000 shares issued in 1997 100,000 100,000
8.5% Series B Cumulative Redeemable Preferred Shares, (stated at
liquidation preference $25 per share), 5,400,000 shares issued in 2001 135,000 135,000
Common shares of beneficial interest, $.01 par, 100,000,000 shares
authorized, 42,094,708 and 41,524,165 issued, respectively 421 417
Additional paid in capital 744,094 730,835
Accumulated dividends in excess of Trust net income (348,080) (322,428)
----------- -----------
631,435 643,824
Less:1,457,328 and 1,452,926 common shares in treasury - at cost, respectively (28,088) (27,990)
Deferred compensation on restricted shares (12,485) (15,005)
Notes receivable from employee stock plans (4,551) (4,148)
Accumulated other comprehensive income (loss) (2,973) (4,293)
----------- -----------
583,338 592,388
----------- -----------
$ 1,875,199 $ 1,837,978
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
4
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended March 31,
2002 2001
-------- --------
(In thousands, except per share data)
Revenue
Rental income $ 71,575 $ 66,825
Interest and other income 1,261 1,857
Other property income 3,482 2,709
-------- --------
76,318 71,391
Expenses
Rental 15,622 15,029
Real estate taxes 7,832 6,600
Interest 16,640 17,150
Administrative 2,999 3,133
Restructuring expenses 8,489 -
Depreciation and amortization 15,986 14,110
-------- --------
67,568 56,022
-------- --------
Operating income before investors' share
of operations and discontinued operations 8,750 15,369
Investors' share of operations (697) (1,378)
-------- --------
Income before loss on abandoned developments
held for sale and discontinued operations 8,053 13,991
Income from operations of discontinued asset 263 242
-------- --------
Income before loss on abandoned developments held for sale 8,316 14,233
Loss on abandoned developments held for sale (9,647) -
-------- --------
Net (loss) income (1,331) 14,233
Dividends on preferred stock (4,856) (1,988)
-------- --------
Net (loss) income available for common shareholders ($6,187) $ 12,245
======== ========
Earnings per common share, basic
Income before loss on abandoned developments held for sale
and discontinued operations $ 0.08 $ 0.31
Discontinued operations 0.01 0.01
Loss on abandoned developments held for sale (0.24) -
-------- --------
($0.15) $ 0.32
======== ========
Weighted average number of common shares, basic 39,702 38,822
======== ========
Earnings per common share, diluted
Income before loss on abandoned developments held for sale
and discontinued operations $ 0.08 $ 0.31
Discontinued operations 0.01 0.01
Loss on abandoned developments held for sale (0.24) -
-------- --------
($0.15) $ 0.32
======== ========
Weighted average number of common shares, diluted 40,942 39,856
======== ========
The accompanying notes are an integral part of these consolidated statements.
5
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
Three months ended March 31,
2002 2001
---------- -------- --------- ---------- --------- ---------------
(In thousands, except share data) Shares Amount Additional Shares Amount Additional
Paid-in Capital Paid-in Capital
Common Shares of Beneficial Interest
Balance, beginning of year 41,524,165 $ 417 $730,835 40,910,972 $ 410 $723,078
Exercise of stock options 437,209 4 8,874 - - -
Shares issued under dividend reinvestment plan 36,345 - 874 39,436 - 773
Performance and Restricted Shares granted, net
of Restricted Shares retired 96,989 - 2,346 95,259 1 1,849
Accelerated vesting of options and restricted shares - - 1,165 - - -
---------- -------- -------- ---------- --------- --------
Balance, end of period 42,094,708 $ 421 $744,094 41,045,667 $ 411 $725,700
========== ======== ======== ========== ========= ========
Accumulated Dividends in Excess of Trust Net Income
Balance, beginning of year ($322,428) ($306,287)
Net income (loss) (1,331) 14,233
Dividends declared to common shareholders (19,465) (18,614)
Dividends declared to preferred shareholders (4,856) (1,988)
-------- ---------
Balance, end of period ($348,080) ($312,656)
======== =========
Common Shares of Beneficial Interest in Treasury
Balance, beginning of year (1,452,926) ($27,990) (1,441,594) ($27,753)
Performance and Restricted Shares forfeited (4,402) (98) (294) (5)
---------- -------- ---------- ----------
Balance, end of period (1,457,328) ($28,088) (1,441,888) ($27,758)
========== ======== ========== =========
Deferred Compensation on Restricted Shares
Balance, beginning of year (666,656) ($15,005) (735,875) ($17,254)
Performance and Restricted Shares issued,
net of forfeitures (73,821) (1,763) (71,869) (1,392)
Vesting of Performance and Restricted Shares 186,246 4,283 106,803 2,554
---------- -------- ---------- ---------
Balance, end of period (554,231) ($12,485) (700,941) ($16,092)
========== ======== ========== =========
Subscriptions receivable from employee stock plans
Balance, beginning of year (218,555) ($4,148) (242,638) ($4,540)
Subscription loans issued (48,333) (1,416) - -
Subscription loans paid 53,329 1,013 19,520 297
---------- -------- ---------- ---------
Balance, end of period (213,559) ($4,551) (223,118) ($4,243)
========== ======== ========== =========
Accumulated other comprehensive income (loss)
Balance, beginning of year ($4,293) -
Change due to recognizing gain on securities 73 -
Change in valuation on interest rate swap 1,247 ($1,079)
-------- ---------
Balance, end of period ($2,973) ($1,079)
======== =========
Other comprehensive income
Net (loss) income ($1,331) $ 14,233
Change due to recognizing gain on securities 73 -
Change in valuation on interest rate swap 1,247 (1,079)
-------- ---------
Total other comprehensive (loss) income ($11) $ 13,154
======== =========
The accompanying notes are an integral part of these consolidated statements.
6
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended March 31,
2002 2001
---------- ---------
(In thousands)
OPERATING ACTIVITIES
Net (loss) income ($1,331) $ 14,233
Items not requiring cash outlays
Depreciation and amortization, including discontinued operations 16,021 14,144
Loss on abandoned developments held for sale 9,647 -
Non-cash portion of restructuring expense 5,806 -
Other, net (2,431) 563
Changes in assets and liabilities
(Increase) in accounts receivable (303) (122)
(Increase) in prepaid expenses and other
assets before depreciation and amortization (1,357) (2,381)
(Decrease) in operating accounts payable,
security deposits and prepaid rent (2,247) (542)
Increase in accrued expenses 8,031 4,001
-------- --------
Net cash provided by operating activities 31,836 29,896
INVESTING ACTIVITIES
Acquisition of real estate - (33,534)
Capital expenditures - development (41,937) (32,978)
Capital expenditures - other (9,445) (21,452)
(Issuance) repayments of mortgage notes receivable, net (7,566) 675
-------- --------
Net cash used in investing activities (58,948) (87,289)
FINANCING ACTIVITIES
Borrowing of short-term debt, net 11,000 75,000
Proceeds from mortgage and construction financing, net of costs 31,427 2,197
Issuance of common shares 8,534 937
Payments on mortgages, capital leases and notes payable (297) (312)
Dividends paid (22,608) (19,933)
(Decrease) in minority interest, net (1,182) (710)
-------- --------
Net cash provided by financing activities 26,874 57,179
-------- --------
(Decrease) in cash (238) (214)
Cash at beginning of period 17,563 11,357
-------- --------
Cash at end of period $ 17,325 $ 11,143
======== ========
The accompanying notes are an integral part of these consolidated statements.
7
Federal Realty Investment Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(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, 2001 which
contain the accounting policies and other data of Federal Realty Investment
Trust (the "Trust").
The following table sets forth the reconciliation between basic and diluted
EPS:
Three months ending
March 31,
Numerator 2002 2001
Net (loss) income available for common
shareholders - basic ($6,187) $12,245
(Loss) income attributable to operating
partnership units (136) 299
------- -------
Net (loss) income available for common
shareholders - diluted ($6,323) $12,544
======= =======
Denominator
Denominator for basic EPS-
weighted average shares 39,702 38,822
Effect of dilutive securities
Stock options and awards 335 129
Operating partnership units 905 905
------- -------
Denominator for diluted EPS 40,942 39,856
======= =======
Risk Management. Upon adoption of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" on January 1, 2001, the Trust had no
derivatives and thus there was no transition adjustment upon adoption. SFAS No.
133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as a hedge of the exposure to certain risks. The Trust enters into
derivative contracts, which qualify as cash flow hedges, in order to manage
interest rate risk. Derivatives are not purchased for speculation. During 2001,
to hedge its exposure to interest rates on its $125 million term loan, the Trust
entered into interest rate swaps, which fixed the LIBOR interest rate on the
term loan at 5.27%. The current interest rate on the term loan is LIBOR plus 95
basis points, thus fixing the interest rate at 6.22% on notional amounts
totaling $125 million. The Trust is exposed to credit loss in the event of
non-performance by the counterparties to the interest rate protection agreement
should interest rates exceed the cap. However, management does not anticipate
non-performance by the counterparties. The counterparties have long-term debt
ratings of A- or above by S&P and AA2 or above by Moody's. Although the Trust's
8
cap is not exchange traded, there are a number of financial institutions which
enter into these types of transactions as part of their day-to-day activities.
The interest rate swaps mature concurrently with the $125 million term loan on
December 19, 2003. The swaps were documented as cash flow hedges and designated
as effective at inception of the swap contract. Consequently, the unrealized
gain or loss upon measuring the swaps at their fair value is recorded as a
component of other comprehensive income within stockholders' equity and either a
derivative instrument asset or liability is recorded on the balance sheet. At
March 31, 2002, a cumulative unrealized loss of $3.1 million, representing the
difference between the current market value and the 6.22% fixed interest rate on
the swap, was recorded in other comprehensive income with a corresponding
derivative liability on the balance sheet. Interest expense of approximately
$1.8 million will be reclassified from other comprehensive income into current
earnings over the next twelve months to bring the effective interest rate up to
6.22%.
Reclassifications. Certain components of rental income, other property income,
rental expense, real estate tax expense and depreciation and amortization
expense on the March 31, 2001 Statement of Operations have been reclassified to
Income from properties held for sale to assure comparability of all periods
presented.
NOTE B - REAL ESTATE ASSETS AND ENCUMBRANCES
On February 1, 2002, to complete the buyout of the minority partner at
Santana Row, the Trust received the minority partner's interest in Santana Row
in exchange for a $2.6 million investment in a partnership. A $5.9 million loan
made by the Trust to the partnership on January 12, 2001 is due January 12,
2003.
The Trust made an additional mortgage loan of $1.5 million to an existing
borrower with an interest rate of 10.0%. $1.1 million of notes were repaid to
the Trust during the first quarter of 2002. In addition, the Trust loaned $7.2
million to the hotel venture at Santana Row. The loan bears interest at rates
ranging from 12% to 15% and has a ten year term. During the first five years,
interest is payable from cash flow, if available. If cash flow is not sufficient
to pay interest in full, the unpaid amount will accrue and bear interest at the
same rate as the principal.
NOTE C - MORTGAGES AND CONSTRUCTION LOANS PAYABLE AND NOTES PAYABLE
At March 31, 2002 there was $55.0 million borrowed under the Trust's
syndicated credit facility. The maximum amount drawn during the quarter was
$60.0 million. The weighted average interest rate on borrowings for the three
months ended March 31, 2002 was 2.6%. The facility requires fees and has various
covenants including the maintenance of a minimum shareholders' equity and a
maximum ratio of debt to net worth. At March 31, 2002 the Trust is in compliance
with all loan covenants.
9
At March 31, 2002 there was $93.1 million borrowed under the construction
loan for the Santana Row development in San Jose, California. The loan, which
initially bears interest at LIBOR plus 212.5 basis points, matures April 16,
2004 with two one-year extension options, subject to certain operating and other
conditions. The interest rate on the loan will decrease to LIBOR plus 187.5
basis points then to LIBOR plus 162.5 basis points upon achievement of certain
leasing, occupancy and net operating income hurdles. There is no assurance that
these conditions and hurdles will be met. The construction loan requires fees
and has various covenants including the maintenance of a minimum shareholders'
equity and a maximum ratio of debt to gross asset value. At March 31, 2002 the
Trust was in compliance with all loan covenants.
At March 31, 2002 there was $23.5 million borrowed under the construction
loan for the Trust's Woodmont East development in Bethesda, Maryland. The loan,
which has a current floating interest rate of LIBOR plus 135 basis points,
matures August 29, 2002 with two one-year extension options. No principal
payments are due until maturity. The property secures the construction loan
facility.
NOTE D - SHAREHOLDERS' EQUITY
In February 2002, options for 415,000 shares at $25.16 per share, fair
market value at the date of award, were awarded to certain officers and
employees of the Trust. The options vest over three years.
NOTE E - INTEREST EXPENSE
The Trust incurred interest expense totaling $21.4 million during the first
three months of 2002 and $21.3 million during the first three months of 2001 of
which $4.8 million and $4.1 million, respectively, was capitalized in connection
with development projects. Interest paid was $18.1 million in the first three
months of 2002 and $17.2 million in the first three months of 2001.
NOTE F - COMMITMENTS AND CONTINGENCIES
Pentagon Row is a mixed-use project with the retail component being
developed by the Trust and the residential component being developed by an
unrelated developer. In October 2000 the general contractor on the project was
replaced by the Trust and the residential developer because of schedule delays
and other events that caused the Trust and the residential developer to conclude
that the original contractor was either unable or unwilling to comply with its
contractual obligations. The Trust and the residential developer filed suit
against the original contractor to recover damages that are being incurred as a
result of defaults under the contract. Though not quantifiable until the project
is completed, the combined damage claim is estimated to be approximately $40
million. The original contractor
10
filed a counterclaim against the Trust and the residential developer for damages
of $7 million plus interest, attorneys' fees and litigation costs. The Trust
believes that the counterclaim is generally without merit and that the outcome
of the counterclaim will not have a material adverse effect on its financial
condition, results of operations or on the project. Work continues under the
direction of the new general contractor. Due to the delay and other costs
associated with the change in general contractor the estimated cost of the
project is now $92 million, if there is no recovery of damages from the original
general contractor. The lawsuit against the original contractor is scheduled for
mediation in May 2002, and, should mediation prove unsuccessful, is scheduled to
go to trial in October 2002.
In addition, the Trust is involved in various lawsuits and environmental
matters arising in the normal course of business. Management believes that such
matters will not have a material effect on the financial condition or results of
operations of the Trust.
Under the terms of the Congressional Plaza partnership agreement, from and
after January 1, 1986 Rockville Plaza Company ("RPC"), an unaffiliated third
party, has the right to require the Trust and the two other minority partners to
purchase from half to all of RPC's 37.5% interest in Congressional Plaza at the
interest's then-current fair market value. Based on management's current
estimate of fair market value, the Trust's estimated liability upon exercise of
the put option is approximately $27.5 million. In conjunction with a
redevelopment currently taking place at the property, the Trust has agreed to
acquire an additional 7.5% interest in Congressional Plaza from RPC in exchange
for funding approximately $7 million of RPC's share of the redevelopment cost.
This funding will take place through 2002 and the transaction will be completed
in 2003.
Under the terms of five other partnership agreements, if certain leasing
and revenue levels are obtained for the properties owned by the partnerships,
the other partners may require the Trust to purchase their partnership interests
at a formula price based upon net operating income. The purchase price may be
paid in cash or for two of the partnerships, a limited number of common shares
of the Trust at the election of the other partners. In certain partnerships, if
the other partners do not redeem their interest, the Trust may choose to
purchase the limited partnership interests upon the same terms.
Under the terms of other partnerships, the partners may exchange their
904,589 operating units for cash or exchange into the same number of common
shares of the Trust, at the option of the Trust.
The Trust has committed approximately $5.5 million to four restaurant joint
ventures at Santana Row in lieu of tenant allowances. The Trust will participate
in profits, losses and cash flow in accordance with the terms of each individual
venture. As of March 31, 2002 the Trust has invested approximately $504,000.
11
NOTE G - COMPONENTS OF RENTAL INCOME
The components of rental income for the periods ended March 31 are as
follows (in thousands):
2002 2001
---- ----
Retail properties
Minimum rents $58,333 $53,747
Cost reimbursements 10,990 10,422
Percentage rents 1,474 1,931
Apartments 778 725
------- -------
$71,575 $66,825
======= =======
NOTE H - RESTRUCTURING EXPENSE
On February 28, 2002 the Trust adopted a new business plan which returns
the Trust's primary focus to its traditional business of acquiring and
redeveloping community and neighborhood shopping centers that are anchored by
supermarkets, drug stores, or high volume, value oriented retailers that provide
consumer necessities. The Trust will complete Bethesda Row, Pentagon Row and
Santana Row but does not plan to develop any new large-scale, mixed-use,
ground-up development projects. Rather, the Trust will seek to acquire income
producing centers and may seek opportunities to develop ground-up grocery
anchored shopping centers, all in and around the metropolitan Washington, D.C.,
Philadelphia and New York markets, and will identify and execute redevelopment
opportunities in its existing portfolio. Concurrent with the adoption of the
business plan, the Trust adopted a management succession plan and restructured
its management team.
In connection with this change in business plan the Trust recorded a charge
of $18.2 million, which includes a restructuring charge of $8.5 million; $6.9
million of severance and other compensation costs for several senior officers of
the Trust related to the management restructuring, as well as the write-off of
$1.6 million of the Trust's development costs. Cash payments and non-cash
compensation and non-cash writedowns of development costs against this $8.5
million reserve totaled $7.0 million for the three months ended March 31, 2002.
An additional component of the restructuring charge is an impairment loss of
$9.7 million representing the estimated loss on the abandonment of development
projects held for sale, primarily the Tanasbourne development project located in
Portland, Oregon, thereby adjusting the value of these assets to their estimated
fair value. The Trust is marketing these properties, components of the Trust's
western region, for sale. The current carrying value of these properties,
classified on the Trust's consolidated balance sheet as real estate held for
sale, is $8.4 million.
12
NOTE I - DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
On April 11, 2002 the Trust sold the street retail property located at 252
Greenwich Avenue in Greenwich, Connecticut for $16.5 million. The carrying
amount of this property, classified on the Trust's consolidated balance sheet as
Real estate held for sale, is $9.7 million. The net income from this property,
reported as income from properties held for sale on the Trust's consolidated
statements of operations, was $263,000 and $242,000 for the three months ended
March 31, 2002 and 2001, respectively. This property is a component of the
Trust's northeast region. The gain from the sale of this asset will be recorded
in the second quarter of 2002.
13
NOTE J - SEGMENT INFORMATION
The Trust operates its portfolio of properties in three geographic
operating regions: Northeast, Mid-Atlantic and West.
A summary of the Trust's operations by geographic region is presented below
(in thousands):
Three months ended Mid-
March 31, 2002 Northeast Atlantic West Other Total
- -----------------------------------------------------------------------------------------------------------------------------
Rental income $ 29,724 $ 32,974 $ 8,877 $ 71,575
Other income 1,652 1,322 508 3,482
Rental expense (5,437) (7,290) (2,895) (15,622)
Real estate tax (4,079) (2,947) (806) (7,832)
-------- -------- -------- ----------
Net operating income 21,860 24,059 5,684 51,603
Interest income $ 1,261 1,261
Interest expense (16,640) (16,640)
Administrative expense (2,999) (2,999)
Restructuring expense (8,489) (8,489)
Depreciation and
amortization (7,073) (6,588) (2,102) (223) (15,986)
-------- -------- -------- --------- ----------
Income before
investors' share
of operations and
discontinued
operations $ 14,787 $ 17,471 $ 3,582 ($27,090) $ 8,750
======== ======== ======== ========= ==========
Capital expenditures $ 850 $ 10,222 $ 48,281 $ 59,353
======== ======== ======== ==========
Real estate assets $761,564 $803,672 $579,810 $2,145,046
======== ======== ======== ==========
Three months ended Mid-
March 31, 2001 Northeast Atlantic West Other Total
- -----------------------------------------------------------------------------------------------------------------------------
Rental income $ 28,673 $ 30,042 $ 8,110 $ 66,825
Other income 1,040 977 692 2,709
Rental expense (6,602) (6,207) (2,220) (15,029)
Real estate tax (3,612) (2,315) (673) (6,600)
-------- -------- -------- ----------
Net operating income 19,499 22,497 5,909 47,905
Interest income $ 1,857 1,857
Interest expense (17,150) (17,150)
Administrative expense (3,133) (3,133)
Depreciation and
amortization (6,664) (5,664) (1,555) (227) (14,110)
-------- -------- -------- --------- ----------
Income before
investors' share
of operations $ 12,835 $ 16,833 $ 4,354 ($18,653) $ 15,369
======== ======== ======== ========= ==========
Capital expenditures $ 6,737 $ 15,135 $ 48,926 $ 70,798
======== ======== ======== ==========
Real estate assets $760,725 $735,267 $429,576 $1,925,568
======== ======== ======== ==========
There are no transactions between geographic areas.
14
FEDERAL REALTY INVESTMENT TRUST
FORM 10-Q
March 31, 2002
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of Federal Realty Investment
Trust (the "Trust"). The Trust and its representatives may from time to time
make written or oral statements that are "forward-looking", within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause actual results, performance or achievement's of the Trust to be
materially different from the results of operations or plans expressed or
implied by such forward-looking statements. Such factors include, among others,
... changes in our business strategy;
... general economic and business conditions which will affect the credit
worthiness of tenants;
... financing availability and cost;
... retailing trends and rental rates;
... risks of real estate development and acquisitions, including the risk that
potential acquisitions or development projects may not perform in
accordance with expectations;
... our ability to satisfy the complex rules in order to qualify for taxation
as a REIT for federal income tax purposes and to operate effectively within
the limitations imposed by these rules;
... government approvals, actions and initiatives including the need for
compliance with environmental and safety requirements, and changes in laws
and regulations or the interpretation thereof; and
... competition with other real estate companies, real estate projects and
technology.
We identify forward-looking statements by using words or phrases such as
"anticipate", "believe", "estimate", "expect", "intend", "may be", "objective",
"plan", "predict", "project", and "will be" and similar words or phrases, or the
negatives thereof or other similar variations thereof or comparable terminology.
We undertake no obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.
15
LIQUIDITY AND CAPITAL RESOURCES
Federal Realty meets its liquidity requirements through net cash provided
by operating activities, along with debt and equity funding alternatives
available to it. A significant portion of cash provided by operating activities
is distributed to common and preferred shareholders in the form of dividends.
Accordingly, capital outlays for property acquisitions, major renovation and
development projects and balloon debt repayments require debt or equity funding.
At times, proceeds from the sale of selected assets may also provide an
additional source of capital. From 1998 until November 2001, the Trust relied
primarily on debt to fund these capital needs, and accordingly, debt as a
percentage of total capitalization steadily increased over that period. In
November 2001 the Trust issued $135 million of preferred stock. In the future,
the Trust will look to common, preferred and joint-venture equity in addition to
debt to fund longer term growth needs.
Net cash provided by operating activities was $31.8 million in the first
quarter of 2002 and $29.9 million in the first quarter of 2001 of which $22.6
million and $19.9 million, respectively, was distributed to shareholders.
Contributions from newly acquired, retenanted, redeveloped and developed
properties, such as Pentagon Row, as more fully described below, were the
primary sources of this increase.
Net cash used in investing activities was $58.9 million during the first
quarter of 2002 and $87.3 million during the first quarter of 2001. There was no
real estate acquired in the first quarter of 2002. Cash outlays for real estate
in the first quarter of 2001 totaled $33.5 million. During these two periods,
the Trust expended an additional $51.4 million and $54.4 million, respectively,
in capital improvements to its properties. The Trust invested $8.7 million
during the first quarter of 2002 and $553,000 during the first quarter of 2001
in mortgage notes receivable with an average weighted interest rate of 11.7% and
10%, respectively. $1.1 million and $1.2 million of notes receivable were repaid
during the first quarter of 2002 and 2001, respectively.
On February 1, 2002, to complete the buyout of the minority partner at
Santana Row, the Trust received the minority partner's interest in Santana Row
in exchange for a $2.6 million investment in a partnership. A $5.9 million loan
made by the Trust to the partnership on January 12, 2001 is due January 12,
2003.
Of the $51.4 million spent in the first quarter of 2002 on the Trust's
existing real estate portfolio, approximately $41.9 million was invested in
development projects in San Jose, California and in Arlington, Virginia. The
remaining $9.5 million of capital expenditures relates to improvements to common
areas, tenant work and various redevelopments, including the Congressional
Apartments in Rockville, Maryland, the completion of tenant work at the Trust's
16
Woodmont East development in Bethesda, Maryland and the redevelopment of retail
buildings in San Antonio, Texas.
Net cash provided by financing activities, before dividend payments, was
$49.5 million in the first quarter of 2002 and $77.1 million in the first
quarter of 2001. The Trust utilizes its unsecured syndicated line of credit and
the Santana Row construction loan to fund capital expenditures. At March 31,
2002 there was $55.0 million borrowed under this syndicated credit facility. The
maximum amount drawn during the quarter was $60.0 million. The weighted average
interest rate on borrowings for the three months ended March 31, 2002 was 2.6%.
The facility requires fees and has various covenants including the maintenance
of a minimum shareholders' equity and a maximum ratio of debt to net worth.
Capital requirements for the remainder of 2002 will depend upon acquisition
opportunities, the rate of build-out on the Trust's current developments and the
level of improvements and redevelopments on existing properties.
The Trust will need additional capital in order to fund acquisitions,
expansions and any new developments, including future phases of Santana Row, if
any, and to refinance its maturing debt. Sources of this funding may be
additional debt, both secured and unsecured, additional equity and joint venture
relationships. In addition, the Trust has identified certain of its properties
that may be exchanged or sold as a source of funding, if the Trust's sales price
is met.
Santana Row
In 2002, the Trust's single largest capital need is anticipated to be the
development of Santana Row, a multi-phase mixed-use project being built on 42
acres in San Jose, California in the heart of Silicon Valley. The project will
consist of residential, retail and hotel components, creating a community with
the feel of an urban district. Phase 1 of the project includes Santana Row, the
"1,500 foot long main street" and nine buildings which will contain
approximately 538,000 square feet of retail space, 501 residential units, a 214
room hotel and the supporting infrastructure. Eight buildings comprising 440,000
square feet of retail space are expected to be completed during the third and
fourth quarters of 2002 with the ninth building being completed twelve to
eighteen months later. The Trust estimates the total cost of Phase 1 to be
$500 million. As of March 31, 2002, the Trust has incurred costs of $274 million
including the purchase of the land; the Trust estimates that it will spend
approximately $197 million in the remainder of 2002 and the balance in 2003 to
complete the first phase of the project.
On April 17, 2001, the Trust closed on a $295 million construction loan.
The loan, which initially bears interest at LIBOR plus 212.5 basis points,
matures April 16, 2004 with two one-year extension options, subject to certain
operating and other conditions. The interest rate on the loan will decrease to
LIBOR plus 187.5
17
basis points then to LIBOR plus 162.5 basis points upon the achievement of
certain leasing, occupancy and net operating income hurdles. There is no
assurance that these conditions and hurdles will be met. The construction loan
requires fees and has various covenants including the maintenance of a minimum
shareholders' equity and a maximum ratio of debt to gross asset value. As of
March 31, 2002, $93.1 million was borrowed under the loan.
The success of Santana Row will depend on many factors which cannot be
assured and are not entirely within the Trust's control. These factors include
among others, the demand for retail and residential space and at what rents, the
ability to construct the current and later phases at reasonable costs, the cost
of operations, including utilities and insurance, the availability and cost of
capital and the general economy, particularly in the Silicon Valley.
The Trust has not finalized the cost and scope for future phases of Santana
Row and will not do so until the success of Phase 1 and future demand for rental
space is determined. However, as Phase 1 utilizes only part of the retail and
residential entitlements of the property, and as Phase 1 contains infrastructure
for future phases, the Trust expects to identify and execute economically viable
additional phases to the project.
CONTINGENCIES
Pentagon Row is a mixed-use project with the retail component being
developed by the Trust and the residential component being developed by an
unrelated developer. In October 2000 the general contractor on the project was
replaced by the Trust and the residential developer because of schedule delays
and other events that caused the Trust and the residential developer to conclude
that the original contractor was either unable or unwilling to comply with its
contractual obligations. The Trust and the residential developer filed suit
against the original contractor to recover damages that are being incurred as a
result of defaults under the contract. Though not quantifiable until the project
is completed, the combined damage claim is estimated to be approximately $40
million. The original contractor filed a counterclaim against the Trust and the
residential developer for damages of $7 million plus interest, attorneys' fees
and litigation costs. The Trust believes that the counterclaim is generally
without merit and that the outcome of the counterclaim will not have a material
adverse effect on its financial condition, results of operations or on the
project. Work continues under the direction of the new general contractor. Due
to the delay and other costs associated with the change in general contractor
the estimated cost of the project is now $92 million, if there is no recovery of
damages from the original general contractor. The lawsuit against the original
contractor is scheduled for mediation in May 2002, and, should mediation prove
unsuccessful, is scheduled to go to trial in October 2002.
In addition, the Trust is involved in various lawsuits and environmental
matters arising in the normal course of business.
18
Management believes that such matters will not have a material effect on the
financial condition or results of operations of the Trust.
Under the terms of the Congressional Plaza partnership agreement, from and
after January 1, 1986 Rockville Plaza Company ("RPC"), an unaffiliated third
party, has the right to require the Trust and the two other minority partners to
purchase from half to all of RPC's 37.5% interest in Congressional Plaza at the
interest's then-current fair market value. Based on management's current
estimate of fair market value, the Trust's estimated liability upon exercise of
the put option is approximately $27.5 million. In conjunction with a
redevelopment currently taking place at the property, the Trust has agreed to
acquire an additional 7.5% interest in Congressional Plaza from RPC in exchange
for funding approximately $7 million of RPC's share of the redevelopment cost.
This funding will take place through 2002 and the transaction will be completed
in 2003.
Under the terms of five other partnership agreements, if certain leasing
and revenue levels are obtained for the properties owned by the partnerships,
the other partners may require the Trust to purchase their partnership interests
at a formula price based upon net operating income. The purchase price may be
paid in cash or for two of the partnerships, a limited number of common shares
of the Trust at the election of the other partners. In certain partnerships, if
the other partners do not redeem their interest, the Trust may choose to
purchase the limited partnership interests upon the same terms.
Under the terms of other partnerships, the partners may exchange their
904,589 operating units for cash or exchange into the same number of common
shares of the Trust, at the option of the Trust.
The Trust has committed approximately $5.5 million to four restaurant joint
ventures at Santana Row in lieu of tenant allowances. The Trust will participate
in profits, losses and cash flow in accordance with the terms of each individual
venture. As of March 31, 2002 the Trust has invested approximately $504,000.
19
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2002 AND 2001
Net income and funds from operations have been affected by the Trust's
recent acquisition, redevelopment and financing activities. The Trust has
historically reported its funds from operations in addition to its net income
and net cash provided by operating activities. Funds from operations is a
supplemental measure of real estate companies' operating performance. The
National Association of Real Estate Investment Trusts ("NAREIT") defines funds
from operations as follows: income available for common shareholders before
depreciation and amortization of real estate assets and before extraordinary
items less gains on sale of real estate. Funds from operations does not replace
net income as a measure of performance or net cash provided by operating
activities as a measure of liquidity. Rather, funds from operations has been
adopted by real estate investment trusts to provide a consistent measure of
operating performance in the industry. Nevertheless, funds from operations, as
presented by the Trust, may not be comparable to funds from operations as
presented by other real estate investment trusts.
The reconciliation of net income to funds from operations for the three
months ended March 31 is as follows:
2002 2001
---- ----
(in thousands)
Net (loss) income available for
common shareholders ($6,187) $12,245
Depreciation and amortization
of real estate assets 14,537 12,866
Amortization of initial direct
costs of leases 1,171 969
Loss on abandoned developments held
for sale 9,647 -
(Loss) income attributable to
operating partnership units (136) 299
------- -------
Funds from operations for common
shareholders $19,032 $26,379
======= =======
Consolidated Results
- --------------------
Rental income, which consists of minimum rent, percentage rent and cost
recoveries, increased 7.1% from $66.8 million in the first quarter of 2001 to
$71.6 million in the first quarter of 2002. On a same center basis, rental
income increased 5.1%, due primarily to the favorable impact of redeveloped and
retenanted centers, as well as, increases associated with lease rollovers. Same
center basis, in 2002, excludes Williamsburg Shopping Center in Williamsburg,
Virginia, 101 E. Oak Street in Chicago, Illinois and 70/10 Austin Street in
Forest Hills, New York which were sold in 2001, Friendship Center in Washington,
D.C. which was purchased on September 21, 2001, the office building located at
580 Market Street in San Francisco,
20
California which was exchanged for the minority partner's interest in Santana
Row and properties under development in 2001 and 2002, including Pentagon Row in
Arlington, Virginia and Santana Row in San Jose, California.
Other property income includes items, which although recurring, tend to
fluctuate more than rental income from period to period, such as utility
reimbursements, telephone income, merchant association dues, late fees, lease
termination fees and temporary tenant income. Other property income increased
28.5% from $2.7 million in 2001 to $3.5 million in 2002 due primarily to
increases in lease termination fees of $342,000 and income earned at the
Pentagon Row project which began phasing into service in the second quarter of
2001. On a same center basis, other property income increased 19.3%, primarily
due to the increased lease termination fees.
Rental expenses increased 3.9% from $15.0 million in the first quarter of
2001 to $15.6 million in the first quarter of 2002. Expenses for the Pentagon
Row project were the major cause of this increase. Rental expense as a
percentage of property income, rental income plus other property income,
decreased from 21.6% in 2001 to 20.8% in 2002. On a same center basis, rental
expenses decreased 4.6% from $14.8 million in 2001 to $14.1 million in 2002,
primarily due to decreased snow removal costs in 2002.
Real estate taxes increased 18.7% from $6.6 million in the first quarter of
2001 to $7.8 million in the first quarter of 2002. On a same center basis, real
estate taxes increased 16.2% due primarily to increased taxes on recently
redeveloped properties and overall increases in tax assessments.
Depreciation and amortization expenses increased 13.3% from $14.1 million
in the first quarter of 2001 to $16.0 million in the first quarter of 2002
reflecting the impact of recent new development, tenant work and property
redevelopments which were placed in service throughout 2001 and the first
quarter of 2002.
During the first quarter of 2002 the Trust incurred interest expense of
$21.4 million, of which $4.8 million was capitalized, as compared to 2001's
$21.3 million of which $4.1 million was capitalized. The modest increase in
interest expense reflects the additional construction debt issued to fund the
Trust's capital improvement programs offset by the decrease in interest expense
on the Trust's syndicated credit facility, reflecting the pay-down on the credit
facility with the proceeds from the November 2001 preferred stock offering, as
well as lower interest rates on the Trust's variable rate debt. The ratio of
earnings to combined fixed charges and preferred dividends was .98x and 1.29x
for the first quarter of 2002 and 2001, respectively. The ratio of earnings to
fixed charges was 1.16x and 1.39x during the first quarter of 2002 and 2001,
respectively. The ratio of earnings before interest, taxes, depreciation and
amortization ("EBITDA") to combined fixed charges and preferred dividends was
1.32x for the first quarter of 2002 and 1.63x for the first quarter of 2001.
Excluding the one-time
21
restructuring charge of $8.5 million in the first quarter of 2002, the Trust's
ratio of earnings to combined fixed charges and preferred dividends was 1.25x
and 1.29x for the first quarter of 2002 and 2001, respectively. The ratio of
earnings to fixed charges was 1.49x and 1.39x during the first quarter of 2002
and 2001, respectively. The ratio of EBITDA to combined fixed charges and
preferred dividends was 1.60x for the first quarter of 2002 and 1.63x for the
first quarter of 2001.
Administrative expenses decreased from $3.1 million, or 4.4% of revenue in
the first quarter of 2001 to $3.0 million, or 3.9% of revenue in the first
quarter of 2002 primarily due to a reimbursement of $360,000 for acquisition
costs incurred by the Trust that were written off to expense in a prior period.
On February 28, 2002 the Trust adopted a new business plan which returns
the Trust's primary focus to its traditional business of acquiring and
redeveloping community and neighborhood shopping centers that are anchored by
supermarkets, drug stores, or high volume, value oriented retailers that provide
consumer necessities. The Trust will complete Bethesda Row, Pentagon Row and
Santana Row but does not plan to develop any new large-scale, mixed-use,
ground-up development projects. Rather, the Trust will seek to acquire income
producing centers and may seek opportunities to develop ground-up grocery
anchored shopping centers, all in and around the metropolitan Washington, D.C.,
Philadelphia and New York markets, and will identify and execute redevelopment
opportunities in its existing portfolio. Concurrent with the adoption of the
business plan, the Trust adopted a management succession plan and restructured
its management team.
In connection with this change in business plan the Trust recorded a charge
of $18.2 million, which includes a restructuring charge of $8.5 million; $6.9
million of severance and other compensation costs for several senior officers of
the Trust related to the management restructuring, as well as the write-off of
$1.6 million of the Trust's development costs. Cash payments and non-cash
compensation and non-cash writedowns of development costs against this $8.5
million reserve totaled $7.0 million for the three months ended March 31, 2002.
An additional component of the restructuring charge is an impairment loss of
$9.7 million representing the estimated loss on the abandonment of development
projects held for sale, primarily the Tanasbourne development project located in
Portland, Oregon, thereby adjusting the value of these assets to their estimated
fair value. The Trust is marketing these properties, a component of the Trust's
western region, for sale. The current carrying value of these properties,
classified on the Trust's consolidated balance sheet as real estate held for
sale, is $8.4 million.
Investors' share of operations represents the minority interest in the
income of certain properties. The $700,000 decrease from $1.4 million for the
first three months of 2001 to $700,000 for the first three months of 2002 is due
to the Trust's 2001 buy-out of nine street retail buildings in southern
California and three street retail buildings in Forest Hills, New York, thereby
increasing the
22
Trust's ownership to 100%. In addition, the net loss realized by
the Trust in the first quarter of 2002 is reflected in the minority interest
allocation to all operating unit holders who are allocated income as if they
held shares of the Trust.
On April 11, 2002 the Trust sold the street retail property located at 252
Greenwich Avenue in Greenwich, Connecticut for $16.5 million. The income from
this property, reported as income from properties held for sale, was $263,000
and $242,000 for the three months ended March 31, 2002 and 2001, respectively.
As a result of the foregoing items, net income before loss on abandoned
developments held for sale and discontinued operations decreased from $14.0
million during the first quarter of 2001 to $8.1 million during the first
quarter of 2002, while net income decreased from $14.2 million during the first
quarter of 2001 to a loss of $1.3 million during the first three months of 2002.
Net income available for common shareholders decreased from $12.2 million during
the first three months of 2001 to a loss of $6.2 million during the first three
months of 2002, as a result of the forgoing items and as a result of an increase
of $2.9 million in preferred dividends on the 8.5% preferred shares issued in
November 2001.
Growth in net income and funds from operations during 2002 will continue to
be primarily dependent on contributions from the core portfolio. Growth of net
income from the core portfolio is, in part, dependent on the financial health of
the Trust's tenants and on controlling expenses, some of which are beyond the
complete control of the Trust, such as snow removal, insurance and real estate
tax assessments and the general economy. The current weakening of the retail and
overall economic environment could adversely impact the Trust by increasing
vacancies and decreasing rents. In past weak retail and real estate
environments, however, the Trust has been able to replace weak and bankrupt
tenants with stronger tenants; management believes that due to the quality of
the Trust's properties there will continue to be demand for its space. Growth in
the core portfolio, however, will be offset by expenses at Santana Row. Leasing,
marketing and pre-opening expenses at Santana Row prior to its scheduled opening
in fall 2002 and additional depreciation and interest expense as the project is
phased into operations will have a dilutive effect on 2002 earnings.
Growth in net income is also dependent on the amount of the Trust's
leverage and interest rates. The Trust's leverage is increasing as it finances
its development projects. In addition, to the extent variable-rate debt is
unhedged, the Trust will continue to have exposure to changes in market interest
rates. If interest rates increase, net income and funds from operations, as well
as the ultimate cost of the Trust's development projects, will be negatively
impacted. Net income available for common shareholders' and funds from
operations will also be reduced by the November 2001 issuance of the 8.5% Series
B Cumulative Redeemable Preferred Shares.
23
Segment Results
- ---------------
The Trust operates its portfolio of properties in three geographic
operating regions: Northeast, Mid-Atlantic and West.
Historical operating results for the three regions are as follows (in
thousands):
For the three months ended March 31,
2002 2001
- --------------------------------------------------------------------
Rental income
Northeast $29,724 $28,673
Mid-Atlantic 32,974 30,042
West 8,877 8,110
------- -------
Total $71,575 $66,825
======= =======
For the three months ended March 31,
2002 2001
- --------------------------------------------------------------------
Net operating income
Northeast $21,860 $19,499
Mid-Atlantic 24,059 22,497
West 5,684 5,909
------- -------
$51,603 $47,905
======= =======
The Northeast
- -------------
The Northeast region is comprised of fifty-two assets, extending from
suburban Philadelphia north through New York and its suburbs into New England
and west to Illinois and Michigan.
When comparing the first quarter of 2002 with 2001, rental income increased
3.7% from $28.7 million in 2001 to $29.7 million in 2002. On a same center
basis, excluding 101 E. Oak Street and 70/10 Austin Street which were sold in
2001, rental income increased 4.7% from $28.4 million in 2001 to $29.7 million
in 2002, primarily due to increases at recently redeveloped and retenanted
shopping centers such as Brunswick, Dedham, Fresh Meadows, Garden Market and
Wynnewood.
Net operating income increased 12.1% from $19.5 million in 2001 to $21.9
million in 2002. On a same center basis, as defined above, net operating income
increased 13.3% from $19.3 million in 2001 to
24
$21.9 million in 2002, primarily due to increases at the recently redeveloped
and retenanted shopping centers, as well as, increased lease termination fees of
$400,000 and significantly lower common area maintenance costs, specifically
snow removal costs.
The Mid-Atlantic
- -----------------
The Mid-Atlantic region is comprised of thirty-two assets, including
Pentagon Row, the final phase of which is currently under development, extending
from Baltimore south to metropolitan Washington, D.C. and further south through
Virginia and North Carolina into Florida.
When comparing the first quarter of 2002 with 2001, rental income increased
9.8% from $30.0 million in 2001 to $33.0 million in 2002. On a same center
basis, excluding Williamsburg Shopping Center which was sold in 2001, Friendship
Center which was purchased in 2001 and Pentagon Row which is being phased into
service throughout 2001 and 2002, rental income increased 3.5%, due primarily to
successful retenanting at several shopping centers and street retail properties,
as well as the increased rental income from the Trust's Woodmont East project in
Bethesda, Maryland which was open and occupied for a complete quarter in 2002.
When comparing the first quarter of 2002 with 2001, net operating income
increased 6.9% from $22.5 million in 2001 to $24.1 million in 2002. On the same
center basis as defined above net operating income increased 1.1%, with the
increased rental income being offset by increased operating expenses and real
estate taxes.
The West
- --------
The Western region is comprised of thirty-six assets, including Santana
Row, which is currently under development, extending from Texas to the West
Coast.
When comparing the first quarter of 2002 with 2001 on a same center basis,
which excludes 580 Market Street which was exchanged for the minority partner's
interest in Santana Row and Santana Row, which is currently under development,
rental income increased 12.6% from $7.8 million in 2001 to $8.8 million in 2002,
due primarily to increases from the recently redeveloped and retenanted
properties in the Los Angeles area and in San Francisco, California. On an
overall basis, rental income increased 9.5%, from $8.1 million in 2001 to $8.9
million in 2001.
On a same center basis as defined above, net operating income increased
12.2% from $5.7 million in 2001 to $6.3 million in 2002, due primarily to
increases from the recently redeveloped and retenanted properties in the Los
Angeles area and San Francisco, California. Overall net operating income
decreased 3.8% from $5.9 million in 2001 to $5.7 million in 2002, reflecting the
marketing, leasing and start-up costs associated with Santana Row.
25
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
(3)(i) Declaration of Trust of Federal Realty Investment Trust dated May 5,
1999 filed with the Commission on May 25, 1999 as an exhibit to the Trust's
Current Report on Form 8-K is incorporated herein by reference thereto.
(ii) Bylaws of the Trust dated May 5, 1999 filed with the Commission on
May 25, 1999 as an exhibit to the Trust's Current Report on Form 8-K is
incorporated herein by reference thereto.
(10)(i) Termination agreement between Federal Realty Investment Trust and
Cecily A. Ward dated March 1, 2002.
(ii) Termination agreement between Federal Realty Investment Trust and
Nancy J. Herman dated March 29, 2002.
The following filed with the commission as portions of Exhibit 10 to the
Trust's Annual Report on Form 10-K for the year ended December 31, 2001, is
incorporated herein by reference thereto:
(iii) Termination Letter dated March 1, 2002 between Federal Realty
Investment Trust and Ron D. Kaplan.
(iv) Consulting Agreement dated March 1, 2002 between Federal Realty
Investment Trust and Ron D. Kaplan.
(v) Full Recourse Secured Promissory Note dated March 14, 2002 between
Federal Realty Investment Trust and Ron D. Kaplan.
(vi) Share Pledge Agreement dated March 14, 2002 between Federal Realty
Investment Trust and Ron D. Kaplan.
(B) Reports on Form 8-K
A Form 8-K, dated December 31, 2001 was filed on February 12, 2002 in
response to Item 5.
26
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)
May 2, 2002 /s/ Steven J. Guttman
----------------------
Steven J. Guttman, Chairman of the
Board, Chief Executive Officer and
Trustee (Chief Executive Officer)
May 2, 2002 /s/ Larry E. Finger
--------------------
Larry E. Finger, Chief Financial Officer
(Principal Accounting Officer)
27
EXHIBIT INDEX
Item 6. Exhibits and Reports on Form 8-K
(B) Exhibits
(3)(i) Declaration of Trust of Federal Realty Investment Trust
dated May 5, 1999 filed with the Commission on May 25, 1999 as an exhibit to the
Trust's Current Report on Form 8-K is incorporated herein by reference thereto.
(ii) Bylaws of the Trust dated May 5, 1999 filed with the
Commission on May 25, 1999 as an exhibit to the Trust's Current Report on Form
8-K is incorporated herein by reference thereto.
(10)(i) Termination agreement between Federal Realty Investment
Trust and Cecily A. Ward dated March 1, 2002.
(ii) Termination agreement between Federal Realty Investment
Trust and Nancy J. Herman dated March 29, 2002.
The following filed with the commission as portions of Exhibit 10 to
the Trust's Annual Report on Form 10-K for the year ended December 31, 2001,
is incorporated herein by reference thereto:
(iii) Termination Letter dated March 1, 2002 between Federal
Realty Investment Trust and Ron D. Kaplan.
(iv) Consulting Agreement dated March 1, 2002 between Federal
Realty Investment Trust and Ron D. Kaplan.
(v) Full Recourse Secured Promissory Note dated March 14, 2002
between Federal Realty Investment Trust and Ron D. Kaplan.
(vi) Share Pledge Agreement dated March 14, 2002 between
Federal Realty Investment Trust and Ron D. Kaplan.
28