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: June 30,2002
-----------------------------------
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 August 5, 2002
- ------------------------------ -----------------------------
Common Shares of Beneficial Interest 43,237,528
This report, including exhibits, contains 102 pages.
FEDERAL REALTY INVESTMENT TRUST
S.E.C. FORM 10-Q
June 30, 2002
I N D E X
PART I. FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheets
June 30, 2002 (unaudited) and
December 31, 2001 (audited) 4
Consolidated Statements of Operations (unaudited)
Six months ended June 30, 2002 and 2001 5
Consolidated Statements of Operations (unaudited)
Three months ended June 30, 2002 and 2001 6
Consolidated Statements
of Shareholders' Equity (unaudited)
Six months ended June 30, 2002 and 2001 7
Consolidated Statements of Cash Flows (unaudited)
Six months ended June 30, 2002 and 2001 8
Notes to Financial Statements 9-17
Management's Discussion and Analysis of 18-37
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 38-40
2
FEDERAL REALTY INVESTMENT TRUST
S.E.C. FORM 10-Q
June 30, 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,
information contained in these financial statements fairly presents,
in all material respects, the financial condition and results of
operations of the Company.
3
Federal Realty Investment Trust
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2002 2001
(unaudited)
ASSETS (in thousands, except share data)
Real estate, at cost
Operating $ 1,843,170 $ 1,782,318
Development 337,490 321,986
----------- -----------
2,180,660 2,104,304
Less accumulated depreciation and amortization (421,250) (395,767)
----------- -----------
1,759,410 1,708,537
Other Assets
Cash 18,723 17,563
Mortgage notes receivable 48,629 35,607
Accounts and notes receivable 14,611 15,483
Prepaid expenses and other assets, principally
property taxes and lease commissions 44,229 44,733
Tax deferred exchange escrows 55,128 6,006
Debt issue costs, net of accumulated amortization
of $5,486 and $4,840, respectively 6,175 6,952
----------- -----------
$ 1,946,905 $ 1,834,881
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Obligations under capital leases $ 104,513 $ 100,293
Mortgages and construction loans payable 419,634 350,043
Notes payable 171,374 174,843
Accounts payable and accrued expenses 68,814 64,014
Dividends payable 23,930 21,664
Security deposits 6,352 6,026
Prepaid rents 8,184 10,400
Senior notes and debentures 385,000 410,000
5 1/4% Convertible subordinated debentures 75,000 75,289
Investors' interest in consolidated assets 31,045 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, 44,644,869 and 41,524,165 issued, respectively 447 417
Additional paid in capital 809,535 730,835
Accumulated dividends in excess of Trust net income (338,292) (322,428)
----------- -----------
706,690 643,824
Less:1,457,328 and 1,452,926 common shares in treasury - at cost, respectively (28,088) (27,990)
Deferred compensation on restricted shares (12,434) (15,005)
Notes receivable from employee stock plans (8,587) (7,245)
Accumulated other comprehensive income (loss) (4,522) (4,293)
----------- -----------
653,059 589,291
----------- -----------
$ 1,946,905 $ 1,834,881
=========== ===========
The accompanying notes are an integral part of these consolidated statements.
4
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Six months ended June 30,
2002 2001
-------- -------
(In thousands, except per share data)
Revenue
Rental income $ 141,965 $ 132,998
Interest and other income 2,118 3,597
Other property income 6,981 5,897
--------- ---------
151,064 142,492
Expenses
Rental 31,817 29,860
Real estate taxes 15,187 13,257
Interest 31,773 34,680
Administrative 6,496 6,455
Restructuring expenses 8,489 -
Depreciation and amortization 31,752 28,595
--------- ---------
125,514 112,847
--------- ---------
Operating income before investors' share
of operations and discontinued operations 25,550 29,645
Investors' share of operations (2,276) (2,806)
--------- ---------
Income before gain on sale of real estate net of loss on abandoned
developments held for sale and discontinued operations 23,274 26,839
Income from operations of discontinued assets 1,276 1,663
--------- ---------
Income before gain on sale of real estate net of
loss on abandoned developments held for sale 24,550 28,502
Gain on sale of real estate net of loss on abandoned developments held for sale 9,454 7,898
--------- ---------
Net income 34,004 36,400
Dividends on preferred stock (9,712) (3,975)
--------- ---------
Net income available for common shareholders $ 24,292 $ 32,425
========= =========
Earnings per common share, basic
Income before gain on sale of real estate net of loss on abandoned
developments held for sale and discontinued operations $ 0.34 $ 0.59
Discontinued operations 0.03 0.04
Gain on sale of real estate net of loss on abandoned developments held
for sale 0.23 0.20
--------- ---------
$ 0.60 $ 0.83
========= =========
Weighted average number of common shares, basic 40,286 38,908
========= =========
Earnings per common share, diluted
Income before gain on sale of real estate net of loss on abandoned
developments held for sale and discontinued operations $ 0.34 $ 0.59
Discontinued operations 0.03 0.04
Gain on sale of real estate net of loss on abandoned developments held
for sale 0.23 0.20
--------- ---------
$ 0.60 $ 0.83
========= =========
Weighted average number of common shares, diluted 41,568 39,946
========= ========
The accompanying notes are an integral part of these consolidated statements.
5
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended June 30,
2002 2001
-------- --------
(In thousands, except per share data)
Revenue
Rental income $ 71,466 $ 67,160
Interest and other income 958 1,740
Other property income 3,404 3,193
-------- --------
75,828 72,093
Expenses
Rental 16,445 15,002
Real estate taxes 7,448 6,750
Interest 15,133 17,530
Administrative 3,497 3,322
Depreciation and amortization 15,927 14,629
-------- --------
58,450 57,233
-------- --------
Operating income before investors' share
of operations and discontinued operations 17,378 14,860
Investors' share of operations (1,579) (1,428)
-------- --------
Income before gain on sale of real estate
and discontinued operations 15,799 13,432
Income from operations of discontinued assets 435 837
-------- --------
Income before gain on sale of real estate 16,234 14,269
Gain on sale of real estate 19,101 7,898
-------- --------
Net income 35,335 22,167
Dividends on preferred stock (4,856) (1,987)
-------- --------
Net income available for common shareholders $ 30,479 $ 20,180
======== ========
Earnings per common share, basic
Income before gain on sale of real estate $ 0.27 $ 0.29
Discontinued operations 0.01 0.02
Gain on sale of real estate 0.47 0.20
-------- --------
$ 0.75 $ 0.51
======== ========
Weighted average number of common shares, basic 40,798 38,984
======== ========
Earnings per common share, diluted
Income before gain on sale of real estate $ 0.27 $ 0.29
Discontinued operations 0.01 0.02
Gain on sale of real estate 0.46 0.20
-------- --------
$ 0.74 $ 0.51
======== ========
Weighted average number of common shares, diluted 42,136 40,027
======== ========
The accompanying notes are an integral part of these consolidated statements.
6
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
Six months ended June 30,
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 669,136 6 14,072 - - -
Shares issued to purchase partnership interest - - - 328,116 3 6,759
Shares issued under dividend reinvestment plan 69,579 1 1,787 81,836 1 1,602
Performance and Restricted Shares granted, net
of Restricted Shares retired 96,989 - 2,346 95,259 1 1,849
Net proceeds from sale of shares 2,185,000 22 56,561 - - -
Shares issued to purchase operating partnership
units 100,000 1 2,769 - - -
Accelerated vesting of options and restricted
shares - - 1,165 - - -
---------- ---------- -------- ---------- ---------- --------
Balance, end of period 44,644,869 $ 447 $809,535 41,416,183 $ 415 $733,288
========== ========== ======== ========== ========== ========
Accumulated Dividends in Excess of Trust Net Income
Balance, beginning of year ($322,428) ($306,287)
Net income 34,004 36,400
Dividends declared to common shareholders (40,155) (37,402)
Dividends declared to preferred shareholders (9,713) (3,975)
---------- ----------
Balance, end of period ($338,292) ($311,264)
========== ==========
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 188,246 4,334 109,303 2,601
---------- ---------- ---------- ----------
Balance, end of period (552,231) ($12,434) (698,441) ($16,045)
========== ========== ========== ==========
Subscriptions receivable from employee stock plans
Balance, beginning of year (218,555) ($7,245) (242,638) ($6,734)
Subscription and tax loans issued (88,469) (2,612) - (853)
Subscription loans paid 63,329 1,270 19,540 298
---------- ---------- ---------- ----------
Balance, end of period (243,695) ($8,587) (223,098) ($7,289)
========== ========== ========== ==========
Accumulated other comprehensive income (loss)
Balance, beginning of year ($4,293) -
Change due to recognizing gain on securities 53 -
Change in valuation on interest rate swap (282) ($809)
---------- ----------
Balance, end of period ($4,522) ($809)
========== ==========
Comprehensive income
Net income $ 34,004 $ 36,400
Change due to recognizing gain on securities 53 -
Change in valuation on interest rate swap (282) (809)
---------- ----------
Total comprehensive income $ 33,775 $ 35,591
========== ==========
The accompanying notes are an integral part of these consolidated statements.
7
Federal Realty Investment Trust
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended June 30,
2002 2001
---------- -----------
(In thousands)
OPERATING ACTIVITIES
Net income $ 34,004 $ 36,400
Items not requiring cash outlays
Depreciation and amortization, including discontinued operations 32,030 28,957
Gain on sale of real estate (19,101) (7,898)
Loss on abandoned developments held for sale 9,647 -
Non-cash portion of restructuring expense 5,806 -
Other, net 1,810 1,914
Changes in assets and liabilities
Decrease in accounts receivable 3,872 1,168
Increase in prepaid expenses and other
assets before depreciation and amortization (2,106) (4,345)
(Decrease) increase in operating accounts payable,
security deposits and prepaid rent (2,047) 677
Increase in accrued expenses 341 1,164
--------- -----------
Net cash provided by operating activities 64,256 58,037
INVESTING ACTIVITIES
Acquisition of real estate - (41,761)
Capital expenditures - development (94,554) (84,411)
Capital expenditures - other (28,920) (18,241)
Proceeds from sale of real estate 7,394 16,255
(Issuance) repayment of mortgage notes receivable, net (7,534) 3,477
--------- -----------
Net cash used in investing activities (123,614) (124,681)
FINANCING ACTIVITIES
Borrowing of short-term debt, net - 80,500
Proceeds from mortgage and construction financing, net of costs 69,850 74,480
Issuance of common shares, net of subscriptions receivable 67,890 (506)
Payments on mortgages, capital leases and notes payable (29,197) (27,071)
Dividends paid (46,301) (39,905)
(Decrease) in minority interest, net (1,724) (736)
---------- -----------
Net cash provided by financing activities 60,518 86,762
--------- -----------
Increase in cash 1,160 20,118
Cash at beginning of period 17,563 11,357
--------- -----------
Cash at end of period $ 18,723 $ 31,475
========= ===========
The accompanying notes are an integral part of these consolidated statements.
8
Federal Realty Investment Trust
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002
(unaudited)
NOTE A - ACCOUNTING POLICIES AND OTHER DATA
Federal Realty Investment Trust is an equity real estate investment trust
specializing in the ownership, management, development and redevelopment of high
quality retail and mixed-use properties. The Trust operates its portfolios of
properties in three geographic operating regions; Northeast, Mid-Atlantic and
West. As of June 30, 2002, the Trust owns or has an interest in 58 community and
neighborhood shopping centers comprising over 12 million square feet, primarily
located in densely populated and affluent communities throughout the Northeast
and Mid-Atlantic United States. In addition, the Trust owns 56 urban retail and
mixed-use properties comprising over 2 million square feet located in strategic
metropolitan markets across the United States and one apartment complex.
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:
Six months ending Three months ending
June 30, June 30,
Numerator 2002 2001 2002 2001
Net income available for common shareholders - basic $ 24,292 $ 32,425 $ 30,479 $ 20,180
Income attributable to operating partnership units 514 760 650 461
-------- -------- -------- --------
Net income available for common shareholders - diluted $ 24,806 $ 33,185 $ 31,129 $ 20,641
======== ======== ======== ========
Denominator
Denominator for basic EPS-
Weighted average shares 40,286 38,908 40,798 38,984
Effect of dilutive securities
Stock options and awards 396 133 469 138
Operating partnership units 886 905 869 905
-------- -------- -------- --------
Denominator for diluted EPS 41,568 39,946 42,136 40,027
======== ======== ======== ========
Risk Management. The Trust enters into derivative contracts, which qualify as
cash flow hedges under SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities", 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 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
9
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 June 30, 2002, a cumulative
unrealized loss of $4.6 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 $3.2 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 June 30, 2001 Statement of Operations have been reclassified to
Income from operations of discontinued assets to assure comparability of all
periods presented. In addition, certain components of accounts and notes
receivable, tax deferred exchange escrows and notes receivable from employee
stock plans on the December 31, 2001 Balance Sheet and the June 30, 2001
Statement of Common Shareholders Equity have been reclassified 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
and is secured by real property.
On April 11, 2002 the Trust sold the street retail property located at 252
Greenwich Avenue in Greenwich, Connecticut for $16.5 million resulting in a gain
of $7.0 million.
On April 30, 2002 the Trust sold three street retail properties, two in
Westport, Connecticut and one in Westfield, New Jersey, for $19.2 million
resulting in a gain of $6.9 million.
On June 6, 2002 the Trust sold the Uptown Shopping Center located in
Portland, Oregon for $20.8 million resulting in a gain of $4.5 million.
The proceeds from the sales of the four street retail properties and the
Uptown Shopping Center are being held in escrow by a qualified intermediary for
purposes of executing tax-deferred property exchanges.
On June 18, 2002 a partnership, in which an entity of the Trust is the
general partner, sold the street retail property located at 6410 Hollywood
Boulevard in Hollywood, California for $2.3 million resulting in a gain of
$700,000. The proceeds from the sale were received by the partnership at
closing.
10
During the first six months of 2002, the Trust made an additional mortgage
loan of $1.5 million to an existing borrower with an interest rate of 10.0%.
$1.2 million of notes were repaid to the Trust during the first six months 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. On July
3, 2002 a $10 million loan, which was secured by a shopping center in Paramus,
New Jersey, was repaid.
NOTE C - MORTGAGES AND CONSTRUCTION LOANS PAYABLE, NOTES PAYABLE AND OTHER LONG
TERM DEBT
At June 30, 2002 there was $44.0 million borrowed under the Trust's $300
million syndicated credit facility. The maximum amount drawn during the quarter
was $100.0 million. The weighted average interest rate on borrowings for the six
months ended June 30, 2002 was 2.7%. 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 June 30, 2002 the Trust was in compliance
with all loan covenants.
On April 22, 2002 the Trust's $25 million, 8% Senior Notes were paid off
through borrowings on the Trust's syndicated credit facility. In addition, the
Trust's $289,000, 5.25% Convertible Subordinated Debentures were paid off on
April 29, 2002 and the $3.4 million note issued in connection with a land
purchase in Portland, Oregon was paid off on June 18, 2002.
At June 30, 2002 there was $130.7 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 June 30, 2002 the
Trust was in compliance with all loan covenants.
At June 30, 2002 there was $24.3 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 120 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.
11
NOTE D - SHAREHOLDERS' EQUITY
During the first six months of 2002, options for 427,500 shares at prices
ranging from $25.16 to $27.15 per share, fair market value at the dates of
award, were awarded to certain officers, employees and Trustees of the Trust.
The options vest over periods ranging from six months to three years.
On June 12, 2002 the Trust issued 2.2 million common shares at $25.98 per
share, ($27.35 gross, before a 5% underwriters discount), netting $56.6 million.
NOTE E - INTEREST EXPENSE
The Trust incurred interest totaling $43.2 million during the first six
months of 2002 and $42.7 million during the first six months of 2001 of which
$11.4 million and $8.0 million, respectively, was capitalized in connection with
development projects. Interest paid was $42.4 million in the first six months of
2002 and $41.2 million in the first six 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. The original contractor filed a
counterclaim against the Trust and the residential developer. On May 9, 2002 the
Trust and the residential developer entered into a settlement agreement with the
original contractor in which a full settlement, totaling $5 million payable to
the Trust and the residential developer, was reached for all claims and
counterclaims between the parties involved. On June 7, 2002 the original
contractor paid into an escrow account the agreed upon settlement amount. This
settlement was distributed, $3 million to the Trust, which offset the Trust's
cost of the development, and $2 million to the residential developer, in July
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.
The Trust has committed to invest approximately $6.9 million in six
restaurant joint ventures in lieu of tenant allowances. The Trust will
participate in profits, losses and cash flow in accordance with
12
the terms of each individual venture. As of June 30, 2002 the Trust has invested
approximately $2 million; $700,000 of which has been capitalized and $1.3
million of which has been expensed in the second quarter of 2002 to reflect the
Trust's estimate of the permanent impairment of its investment in two of these
ventures due principally to declining economic conditions.
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 various other partnerships, which own shopping center
properties with a cost of approximately $71 million, the partners may exchange
their 796,773 operating units for cash or exchange into the same number of
common shares of the Trust, at the option of the Trust. During the second
quarter of 2002 the Trust issued 100,000 common shares of the Trust valued at
$2.8 million in exchange for 100,000 operating units and cash of $205,000 in
exchange for an additional 7,816 operating units.
Under the terms of four other partnership agreements, which own street
retail properties in southern California with a cost of approximately $61
million, 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.
13
NOTE G - COMPONENTS OF RENTAL INCOME
The components of rental income for the periods ended June 30 are as
follows (in thousands):
Six months Three months
2002 2001 2002 2001
---- ---- ---- ----
Retail Properties
Minimum rents $115,410 $106,644 $57,936 $53,679
Cost reimbursements 22,193 21,809 11,385 11,543
Percentage rents 2,797 3,084 1,358 1,202
Apartments 1,565 1,461 787 736
-------- -------- ------- -------
$141,965 $132,998 $71,466 $67,160
======== ======== ======= =======
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 Trust's existing 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. This charge includes a restructuring charge of $8.5 million
made up of $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. Charges against
the reserve totaled $8.3 million for the six months of 2002 resulting in a
remaining reserve balance of $200,000 at June 30, 2002 which is expected to be
utilized in the third quarter of 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 under development, is $8.4
million.
14
NOTE I - DISCONTINUED OPERATIONS
During the second quarter of 2002 the Trust sold six properties for a
combined gain of $19.1 million. The net income from these properties, reported
as income from operations of discontinued assets in accordance with Financial
Accounting Standard No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", was $1.3 million and $1.7 million for the six months ended
June 30, 2002 and 2001, respectively. Four of these properties were components
of the Trust's northeast region and two were components of the Trust's western
region.
15
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):
Six months ended Mid-
June 30, 2002 Northeast Atlantic West Other Total
- -----------------------------------------------------------------------------------------------------------------
Rental income $ 58,981 $ 66,213 $ 16,771 $ 141,965
Other income 2,712 3,180 1,089 6,981
Interest income -
mortgage notes 1,910 - 928 2,838
Rental expense (10,963) (14,630) (6,224) (31,817)
Real estate tax (7,875) (5,804) (1,508) (15,187)
--------- --------- --------- ----------
Net operating income 44,765 48,959 11,056 104,780
Interest and other income (expense) $ (720) (720)
Interest expense (31,773) (31,773)
Administrative expense (6,496) (6,496)
Restructuring expense (8,489) (8,489)
Depreciation and
Amortization (13,930) (13,352) (4,050) (420) (31,752)
--------- --------- --------- ---------- ----------
Income before
investors' share of operations and
discontinued operations $ 30,835 $ 35,607 $ 7,006 ($47,898) $ 25,550
========= ========= ========= ========== ==========
Capital expenditures $ 7,035 $ 18,747 $ 111,472 $ 137,254
========= ========= ========= ==========
Real estate assets $ 744,406 $ 812,217 $ 624,037 $2,180,660
========= ========= ========= ==========
Six months ended Mid-
June 30, 2001 Northeast Atlantic West Other Total
- -----------------------------------------------------------------------------------------------------------------
Rental income $ 56,991 $ 60,383 $ 15,624 $ 132,998
Other income 2,198 2,641 1,058 5,897
Interest income -
mortgage notes 2,100 - 506 2,606
Rental expense (12,367) (12,504) (4,989) (29,860)
Real estate tax (7,423) (4,608) (1,226) (13,257)
--------- --------- --------- ----------
Net operating income 41,499 45,912 10,973 98,384
Interest and other income $ 991 991
Interest expense (34,680) (34,680)
Administrative expense (6,455) (6,455)
Depreciation and
Amortization (13,361) (11,682) (3,112) (440) (28,595)
--------- --------- --------- ---------- ----------
Income before
investors' share of operations and
discontinued operations $ 28,138 $ 34,230 $ 7,861 ($40,584) $ 29,645
========= ========= ========= ========== ==========
Capital expenditures $ 9,106 $ 31,084 $ 99,913 $ 140,103
========= ========= ========= ==========
Real estate assets $ 762,885 $ 737,554 $ 480,563 $1,981,002
========= ========= ========= ==========
16
Three months ended Mid-
June 30, 2002 Northeast Atlantic West Other Total
- ----------------------------------------------------------------------------------------------------------------------
Rental income $ 29,697 $ 33,239 $ 8,530 $ 71,466
Other income 1,063 1,857 484 3,404
Interest income -
mortgage notes 1,028 - 849 1,877
Rental expense (5,544) (7,340) (3,561) (16,445)
Real estate tax (3,838) (2,856) (754) (7,448)
--------- --------- --------- ----------
Net operating income 22,406 24,900 5,548 52,854
Interest and other income (expense) $ (919) (919)
Interest expense (15,133) (15,133)
Administrative expense (3,497) (3,497)
Depreciation and
Amortization (6,937) (6,764) (2,029) (197) (15,927)
--------- --------- --------- --------- ----------
Income before
investors' share
of operations and
discontinued operations $ 15,469 $ 18,136 $ 3,519 ($19,746) $ 17,378
========= ========= ========= ========= ==========
Capital expenditures $ 6,185 $ 8,525 $ 63,191 $ 77,901
========= ========= ========= ==========
Real estate assets $ 744,406 $ 812,217 $ 624,037 $2,180,660
========= ========= ========= ==========
Three months ended Mid-
June 30, 2001 Northeast Atlantic West Other Total
- ----------------------------------------------------------------------------------------------------------------------
Rental income $ 28,729 $ 30,341 $ 8,090 $ 67,160
Other income 1,160 1,664 369 3,193
Interest income -
mortgage notes 907 - 345 1,252
Rental expense (5,779) (6,297) (2,926) (15,002)
Real estate tax (3,851) (2,292) (607) (6,750)
--------- --------- --------- ----------
Net operating income 21,166 23,416 5,271 49,853
Interest and other income $ 488 488
Interest expense (17,530) (17,530)
Administrative expense (3,322) (3,322)
Depreciation and
Amortization (6,776) (6,019) (1,621) (213) (14,629)
--------- --------- --------- --------- ----------
Income before
investors' share
of operations and
discontinued operations $ 14,390 $ 17,397 $ 3,650 ($20,577) $ 14,860
========= ========= ========= ========= ==========
Capital expenditures $ 2,369 $ 15,949 $ 50,987 $ 69,305
========= ========= ========= ==========
Real estate assets $ 762,885 $ 737,554 $ 480,563 $1,981,002
========= ========= ========= ==========
There are no transactions between geographic areas.
17
FEDERAL REALTY INVESTMENT TRUST
FORM 10-Q
June 30, 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 achievements 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 rules 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.
18
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, substantial capital outlays for property acquisitions, major
renovation and development projects and balloon debt repayments generally
require debt or equity funding. Proceeds from the sale of selected assets
provides 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 and in
June 2002 the Trust issued 2.2 million common shares at $25.98 per share,
($27.35 gross, before a 5% underwriters discount), netting $56.6 million and
debt as a percentage of total capitalization has therefore decreased. In the
future, the Trust will look to common, preferred and joint-venture equity in
addition to debt and property dispositions to fund capital needs.
Net cash provided by operating activities was $64.3 million in the first
half of 2002 and $58.0 million in the first half of 2001 of which $46.3 million
and $39.9 million, respectively, was distributed to shareholders. As more fully
described below, contributions from newly acquired, retenanted, redeveloped and
development properties, such as Pentagon Row, were the primary sources of this
increase.
Net cash used in investing activities was $123.6 million during the first
half of 2002 and $124.7 million during the first half of 2001. No real estate
was acquired in the first half of 2002. Cash outlays to acquire real estate in
the first half of 2001 totaled $41.8 million. During these two periods, the
Trust expended an additional $123.5 million and $102.7 million, respectively, in
capital improvements to its properties. The Trust invested $8.7 million during
the first half of 2002 and $723,000 during the first half of 2001 in mortgage
notes receivable with an average weighted interest rate of 11.7% and 10%,
respectively. $1.2 million and $4.2 million of notes receivable were repaid
during the first half 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.
On April 11, 2002 the Trust sold the street retail property located at 252
Greenwich Avenue in Greenwich, Connecticut for $16.5 million resulting in a gain
of $7.0 million.
19
On April 30, 2002 the Trust sold three street retail properties,
two in Westport, Connecticut and one in Westfield, New Jersey, for $19.2 million
resulting in a gain of $6.9 million.
On June 6, 2002 the Trust sold the Uptown Shopping Center located in
Portland, Oregon for $20.8 million resulting in a gain of $4.5 million.
The proceeds from the sales of the four street retail properties and
the Uptown Shopping Center are being held in escrow by a qualified intermediary
for purposes of executing tax-deferred property exchanges.
On June 18, 2002 a partnership, in which an entity of the Trust is the
general partner, sold the street retail property located at 6410 Hollywood
Boulevard in Hollywood, California for $2.3 million resulting in a gain of
$700,000. The proceeds from the sale were received by the partnership at
closing. In addition, the proceeds of $6 million previously held by a qualified
intermediary from the 2001 sale of the street retail property located at 101
East Oak Street in Chicago, Illinois were released to the Trust as no exchange
property that met the Trust's investment criteria was found.
Of the $123.5 million spent in the first half of 2002 on the Trust's
existing real estate portfolio, approximately $94.6 million was invested in
development projects in San Jose, California and in Arlington, Virginia. The
remaining $28.9 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
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 $106.8 million in the first half of 2002 and $126.7 million in the first
half of 2001. During the first half of 2002 the Trust borrowed $68.7 million and
$1.1 million on its Santana Row and Woodmont East construction loans,
respectively. The $56.6 million of proceeds from a 2.2 million share common
stock offering in June 2002 were used to pay down on the Trust's syndicated
credit facility, which the Trust uses to fund many capital needs prior to
obtaining longer term financing. Maturities of $25 million of 8% Senior Notes,
$289,000 of 5.25% Convertible Subordinated Debentures and a $3.4 million note
were paid during the first six months of 2002. At June 30, 2002 there was $44.0
million borrowed under this credit facility. The maximum amount drawn during the
first six months of 2002 was $100.0 million. The weighted average interest rate
on borrowings for the six months ended June 30, 2002 was 2.7%. 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. As of August 7,
2002 there was $44.0 million borrowed under the credit facility.
20
Capital requirements for the remainder of 2002 will depend upon
acquisition opportunities, the rate of completion of Santana Row and
the level of improvements and redevelopments on existing properties. The Trust's
credit facility, with $256 million available at June 30, 2002, and the $164
million remaining on the Santana Row construction loan, are anticipated to be
sufficient to fund the Trust's acquisition, development and redevelopment needs
through the end of 2002. In addition, the Trust currently has $55 million being
held in escrow by a qualified intermediary for purposes of executing
tax-deferred property exchanges available to fund acquisition activity.
Longer term, the Trust will need additional capital in order to fund
acquisitions, expansions and redevelopments 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 may
sell or exchange certain of its properties as a source of funding.
Santana Row
In 2002, the Trust's single largest capital need is 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. The first building, containing 40,000 square feet and
occupied by Crate & Barrel, opened on June 27, 2002. Seven buildings comprising
approximately 400,000 square feet of retail space are expected to be completed
during the third and fourth quarters of 2002 with the ninth building being
completed thereafter. The Trust estimates the total cost of Phase 1 to be
approximately $500 million. As of June 30, 2002, the Trust has incurred costs of
$329 million including the purchase of the land; the Trust estimates that it
will spend approximately $132 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 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 June 30, 2002, $130.7 million was borrowed under the
loan. As of August 7, 2002 there was $151.3 million borrowed under the
construction loan.
21
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, 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 determined the scope of 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. The original contractor filed a
counterclaim against the Trust and the residential developer. On May 9, 2002 the
Trust and the residential developer entered into a settlement agreement with the
original contractor in which a full settlement, totaling $5 million payable to
the Trust and the residential developer, was reached for all claims and
counterclaims between the parties involved. On June 7, 2002 the original
contractor paid into an escrow account the agreed upon settlement amount. This
settlement was distributed, $3 million to the Trust, which offset the Trust's
cost of the development, and $2 million to the residential developer, in July
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.
The Trust has committed to invest approximately $6.9 million in six
restaurant joint ventures 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 June 30, 2002 the Trust has invested
approximately $2 million; $700,000 of which has been capitalized and $1.3
million of which has been expensed in the second quarter of 2002 to reflect the
Trust's estimate of the permanent impairment of its investment in two of these
ventures due principally to declining economic conditions.
22
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 various other partnerships, which own shopping
center properties with a cost of approximately $71 million, the partners may
exchange their 796,773 operating units for cash or exchange into the same number
of common shares of the Trust, at the option of the Trust. During the second
quarter of 2002 the Trust issued 100,000 common shares of the Trust valued at
$2.8 million in exchange for 100,000 operating units and cash of $205,000 in
exchange for an additional 7,816 operating units.
Under the terms of four other partnership agreements, which own street
retail properties in southern California with a cost of approximately $61
million, 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.
23
RESULTS OF OPERATIONS
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 is as
follows:
Six months ending Three months ending
June 30, June 30,
2002 2001 2002 2001
---- ---- ---- ----
Net income available for common
shareholders - basic $ 24,292 $ 32,425 $ 30,479 $ 20,180
(Gain) on sale of real
estate net of loss on abandoned
developments held for sale (9,454) (7,898) (19,101) (7,898)
Depreciation and amortization of
real estate assets 29,058 26,375 14,521 13,509
Amortization of initial direct
costs of leases 2,371 1,976 1,200 1,007
Income attributable to operating
partnership units 514 760 650 461
-------- -------- -------- --------
Funds from operations for common
shareholders $ 46,781 $ 53,638 $ 27,749 $ 27,259
======== ======== ======== ========
SIX MONTHS ENDED JUNE 30, 2002 and 2001
Consolidated Results
Rental income, which consists of minimum rent, percentage rent and cost
recoveries, increased 6.7% from $133.0 million in the first six months of 2001
to $142.0 million in the first six months of 2002. On a same center basis,
rental income increased 3.9%, due primarily to the favorable impact of
redeveloped and retenanted centers, as well as increases associated with lease
rollovers. Same center basis for the six months ended June 30, 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
24
Market Street in San Francisco, 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. Same center basis, as defined above, includes properties which have
been redeveloped or expanded. Same center rental income, excluding the
contribution from property redevelopments and expansions, increased 3.0%.
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
18.4% from $5.9 million in 2001 to $7.0 million in 2002 due to increases in
lease termination fees, utility reimbursements and the 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 9.6%, primarily
due to the increased lease termination fees and utility reimbursements.
Interest and other income includes interest earned on mortgage notes
receivable, overnight cash investments, including tax-deferred exchange escrow
deposits, as well as a provision for estimated losses related to various
unconsolidated restaurant joint ventures. This provision of $1.3 million
represents the Trust's best estimate of the diminution of value of these
investments which the Trust believes to be permanent based upon the current
economic climate surrounding these ventures. Interest and other income decreased
$1.5 million from $3.6 million in 2001 to $2.1 million in 2002 due to these
joint venture costs.
Rental expenses increased 6.6% from $29.9 million in the first half of
2001 to $31.8 million in the first half of 2002. Expenses for the Pentagon Row
project and pre-opening expenses at Santana Row were the major causes of this
increase. Rental expense as a percentage of property income, rental income plus
other property income, remained constant at 21.5% in 2001 compared to 21.4% in
2002. On a same center basis, rental expenses decreased 6.8% from $29.0 million
in 2001 to $27.1 million in 2002, primarily due to decreased snow removal costs
and lower bad debt in 2002. Same center rental expense, excluding the effect of
property redevelopments and expansions, decreased 7.2%.
Real estate taxes increased 14.6% from $13.3 million in the first half
of 2001 to $15.2 million in the first half of 2002. On a same center basis, real
estate taxes increased 11.7% due primarily to increased taxes on recently
redeveloped properties and overall increases in tax assessments. Same center
real estate taxes, excluding the effect of property redevelopments and
expansions, increased 10.1%.
Depreciation and amortization expenses increased 11.0% from $28.6
million in the first half of 2001 to $31.8 million in the first half of 2002
reflecting the impact of recent new developments, tenant work and property
redevelopments which were placed in service
25
throughout 2001 and the first half of 2002.
During the first half of 2002 the Trust incurred interest of $43.2
million, of which $11.4 million was capitalized, as compared to 2001's $42.7
million of which $8.0 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 and
the June 2002 common 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 1.05x and 1.35x for the first half of 2002 and 2001,
respectively. The ratio of earnings to fixed charges was 1.24x and 1.47x during
the first half of 2002 and 2001, respectively. The ratio of earnings before
interest, taxes, depreciation and amortization ("EBITDA") to combined fixed
charges and preferred dividends was 1.36x for the first half of 2002 and 1.94x
for the first half of 2001. Excluding the one-time 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 1.18x and 1.35x for the first half of
2002 and 2001, respectively; the ratio of earnings to fixed charges was 1.39x
and 1.47x during the first half of 2002 and 2001, respectively; and the ratio of
EBITDA to combined fixed charges and preferred dividends was 1.49x for the first
half of 2002 and 1.94x for the first half of 2001.
Administrative expenses remained constant at $6.5 million in both
periods. Administrative expenses as a percentage of revenue decreased from 4.5%
in the first half of 2001 to 4.3% in the first half of 2002.
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 Trust's existing 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. This charge includes a restructuring charge of $8.5
million made up of $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. Charges
26
against the reserve totaled $8.3 million for the six months of 2002 resulting in
a remaining reserve balance of $200,000 at June 30, 2002 which is expected to be
utilized in the third quarter of 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 under development, is $8.4
million.
On April 11, 2002 the Trust sold the street retail property located at
252 Greenwich Avenue in Greenwich, Connecticut for $16.5 million resulting in a
gain of $7.0 million.
On April 30, 2002 the Trust sold three street retail properties, two in
Westport, Connecticut and one in Westfield, New Jersey, for $19.2 million
resulting in a gain of $6.9 million.
On June 6, 2002 the Trust sold the Uptown Shopping Center located in
Portland, Oregon for $20.8 million resulting in a gain of $4.5 million.
The proceeds from the sales of the four street retail properties and
the Uptown Shopping Center are being held in escrow by a qualified intermediary
for purposes of executing tax-deferred property exchanges.
On June 18, 2002 a partnership, in which an entity of the Trust is the
general partner, sold the street retail property located at 6410 Hollywood
Boulevard in Hollywood, California for $2.3 million resulting in a gain of
$700,000. The proceeds from the sale were received by the partnership at
closing.
On April 27, 2001 the Trust sold the Williamsburg Shopping Center in
Williamsburg, Virginia for $16.7 million resulting in a gain of $7.9 million.
Investors' share of operations represents the minority interest in the
income of certain properties. The $500,000 decrease from $2.8 million for the
first six months of 2001 to $2.3 million for the first six months of 2002 is due
to the Trust's 2001 purchase of the minority interest in nine street retail
buildings in southern California and three street retail buildings in Forest
Hills, New York and the operating unit holders share of the first quarter 2002
loss.
During the second quarter of 2002 the Trust sold six properties for a
combined gain of $19.1 million. The net income from these properties, reported
as income from operations of discontinued assets, was $1.3 million and $1.7
million for the six months ended June 30, 2002 and 2001, respectively. Four of
these properties were
27
components of the Trust's northeast region and two were components of the
Trust's western region.
As a result of the foregoing items, income before gain on sale of
real estate net of loss on abandoned developments held for sale and discontinued
operations decreased from $26.8 million during the first half of 2001 to $23.3
million during the first half of 2002, while net income decreased from $36.4
million during the first half of 2001 to $34.0 million during the first half of
2002. Net income available for common shareholders decreased from $32.4 million
during the first six months of 2001 to a $24.3 million during the first six
months of 2002, as a result of the forgoing items and as a result of an increase
of $5.7 million in preferred dividends on the 8.5% preferred shares issued in
November 2001.
Growth in net income and funds from operations during the remainder of
2002 will be primarily dependent on contributions from the core portfolio.
Growth of net income from the core portfolio is, in part, dependent on the
general economy, 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. 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. The Trust's properties were 95.9% leased at June 30, 2002 and 95.6%
leased at June 30, 2001.
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 and 2003 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.
28
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 six months ended June 30,
2002 2001
- --------------------------------------------------------------------------------
Rental income
Northeast $ 58,981 $ 56,991
Mid-Atlantic 66,213 60,383
West 16,771 15,624
--------- ---------
Total $ 141,965 $ 132,998
========= =========
For the six months ended June 30,
2002 2001
- --------------------------------------------------------------------------------
Net operating income, including interest income on mortgage notes receivable
Northeast $ 44,765 $ 41,499
Mid-Atlantic 48,959 45,912
West 11,056 10,973
--------- ---------
$ 104,780 $ 98,384
========= =========
The Northeast
The Northeast region is comprised of forty-eight 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 half of 2002 with 2001, rental income
increased 3.5% from $57.0 million in 2001 to $59.0 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 4.5% from $56.4 million in 2001 to $59.0
million in 2002, due to increases at recently redeveloped and retenanted
shopping centers such as Brunswick, Dedham, Fresh Meadows, Garden Market and
Wynnewood as well as increases associated with lease rollovers. Same center
rental income, excluding the contribution from property redevelopments and
expansions, increased 3.7%.
Net operating income, including interest income on mortgage notes
receivable, increased 7.9% from $41.5 million in 2001 to $44.8
29
million in 2002. On a same center basis, as defined above, net operating income
increased 9.5% from $40.9 million in 2001 to $44.8 million in 2002, primarily
due to increases at the recently redeveloped and retenanted shopping centers,
lease rollovers and significantly lower common area maintenance costs,
specifically snow removal costs. Same center net operating income, excluding the
contribution from property redevelopments and expansions, increased 8.5%.
The Mid-Atlantic
The Mid-Atlantic region is comprised of thirty-two assets, including
Pentagon Row, which was substantially completed in 2002, extending from
Baltimore south to metropolitan Washington, D.C. and further south through
Virginia and North Carolina into Florida.
When comparing the first half of 2002 with 2001, rental income increased
9.7% from $60.4 million in 2001 to $66.2 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 1.6%, 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 full six months in 2002.
These increases were offset by higher vacancy levels at three of the region's
shopping centers. There were no significant contributions from redevelopments or
expansions in this region during the six months ended June 30 2002 and 2001.
When comparing the first half of 2002 with 2001, net operating income
increased 6.6% from $45.9 million in 2001 to $49.0 million in 2002. On the same
center basis as defined above, net operating income increased 1.0%, with the
increased rental income offset by increased real estate taxes.
The West
The Western region is comprised of thirty-four assets, including Santana
Row, which is currently under development, extending from Texas to the West
Coast.
When comparing the first half 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 11.0% from $15.1 million in 2001 to $16.7 million in
2002, due to increases from the recently redeveloped and retenanted properties
in the Los Angeles area and in San Francisco, California as well as increases
associated with lease rollovers. Same center rental income, excluding the
contribution from redevelopments and expansions, increased 7.1%. On an overall
basis, rental income increased 7.3%, from $15.6 million in 2001 to $16.8 million
in 2002.
30
On a same center basis as defined above, net operating income, including
interest income on mortgage notes receivable, increased 20.6% from $10.5 million
in 2001 to $12.6 million in 2002, due primarily to increases from the recently
redeveloped and retenanted properties in the Los Angeles area and San Francisco,
California and higher participating interest income on mortgage notes
receivable. Same center net operating income, excluding the contribution from
redevelopments and expansions, increased 17.1%. Overall net operating income
remained constant at $11.0 million in 2001 and $11.1 million in 2002, reflecting
the above mentioned increases offset by the marketing, leasing and start-up
costs associated with Santana Row.
31
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2002 AND 2001
Consolidated Results
Rental income, which consists of minimum rent, percentage rent and cost
recoveries, increased 6.4% from $67.2 million in the second quarter of 2001 to
$71.5 million in the second quarter of 2002. On a same center basis, rental
income increased 2.8%, due primarily to the favorable impact of redeveloped and
retenanted centers, as well as, increases associated with lease rollovers. Same
center basis, in the second quarter of 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, 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. Same center basis,
as defined above, includes properties which have been redeveloped or expanded.
Same center rental income, excluding the contribution from property
redevelopments and expansions, increased 1.9%.
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
6.6% from $3.2 million in 2001 to $3.4 million in 2002 due to the 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 remained constant
at $2.9 million.
Interest and other income includes interest earned on mortgage notes
receivable, overnight cash investments, including tax-deferred exchange escrow
deposits, as well as a provision for estimated losses related to various
unconsolidated restaurant joint ventures. This provision of $1.3 million
represents the Trust's best estimate of the diminution of value of these
investments which the Trust believes to be permanent based upon the current
economic climate surrounding these ventures. Interest and other income decreased
$700,000 from $1.7 million in 2001 to $1.0 million in 2002 due to these joint
venture costs which offset higher interest earned on mortgage notes receivable.
Rental expenses increased 9.6% from $15.0 million in the second quarter of
2001 to $16.4 million in the second quarter of 2002. Expenses for the Pentagon
Row project and pre-opening expenses at Santana Row were the major causes of
this increase. As a result of the increased expenses at Santana Row in 2002,
rental expense as a percentage of property income, rental income plus other
property income, increased from 21.3% in 2001 to 22.0% in 2002. On a same center
basis, rental expenses decreased 8.3% from $14.4 million in 2001 to $13.2
million in 2002, primarily due to decreased snow
32
removal, bad debt and property management costs in 2002. Same center rental
expense, excluding the effect of property redevelopments and expansions,
decreased 8.7%.
Real estate taxes increased 10.3% from $6.8 million in the second quarter
of 2001 to $7.4 million in the second quarter of 2002. On a same center basis,
real estate taxes increased 7.3% due primarily to increased taxes on recently
redeveloped properties and overall increases in tax assessments. Same center
real estate taxes, excluding the effect of property redevelopments and
expansions, increased 6.4%.
Depreciation and amortization expenses increased 8.9% from $14.6 million in
the second quarter of 2001 to $15.9 million in the second quarter of 2002
reflecting the impact of recent new developments, tenant work and property
redevelopments which were placed in service throughout 2001 and the first half
of 2002.
During the second quarter of 2002 the Trust incurred interest of $21.7
million, of which $6.6 million was capitalized, as compared to 2001's $21.4
million of which $3.9 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 and
the June 2002 common stock offering, as well as lower interest rates on the
Trust's variable rate debt.
Administrative expenses, while increasing from $3.3 million in the second
quarter of 2001 to $3.5 million in the second quarter of 2002 remained at 4.6%
of revenue.
On April 11, 2002 the Trust sold the street retail property located at 252
Greenwich Avenue in Greenwich, Connecticut for $16.5 million resulting in a gain
of $7.0 million.
On April 30, 2002 the Trust sold three street retail properties, two in
Westport, Connecticut and one in Westfield, New Jersey, for $19.2 million
resulting in a gain of $6.9 million.
On June 6, 2002 the Trust sold the Uptown Shopping Center located in
Portland, Oregon for $20.8 million resulting in a gain of $4.5 million.
The proceeds from the sales of the four street retail properties and the
Uptown Shopping Center are being held by a qualified intermediary for purposes
of executing tax-deferred property exchanges.
On June 18, 2002 a partnership, in which an entity of the Trust is the
general partner, sold the street retail property located at 6410 Hollywood
Boulevard in Hollywood, California for $2.3 million resulting in a gain of
$700,000. The proceeds from the sale were
33
received by the partnership at closing.
On April 27, 2001 the Trust sold the Williamsburg Shopping Center in
Williamsburg, Virginia for $16.7 million resulting in a gain of $7.9 million.
Investors' share of operations represents the minority interest in the
income of certain properties. The $200,000 increase from $1.4 million in the
second quarter of 2001 to $1.6 million in the second quarter of 2002 is due to
the increased net income of operating unit holders who are allocated income as
if they held shares of the Trust. This increase is partially offset by the
Trust's 2001 purchase of the minority interest in nine street retail buildings
in southern California and three street retail buildings in Forest Hills, New
York.
During the second quarter of 2002 the Trust sold six properties for a
combined gain of $19.1 million. The net income from these properties, reported
as income from operations of discontinued assets, was $435,000 and $837,000 for
the three months ended June 30, 2002 and 2001, respectively. Four of these
properties were components of the Trust's northeast region and two were
components of the Trust's western region.
As a result of the foregoing items, income before gain on sale of real
estate and discontinued operations increased from $13.4 million during the
second quarter of 2001 to $15.8 million during the second quarter of 2002, while
net income increased from $22.2 million during the second quarter of 2001 to
$35.3 million during the second quarter of 2002. Net income available for common
shareholders increased from $20.2 million during the second quarter of 2001 to
$30.5 million during the second quarter of 2002, as a result of the forgoing
items, offset by the increase of $2.9 million in preferred dividends on the 8.5%
preferred shares issued in November 2001.
34
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 June 30,
2002 2001
- --------------------------------------------------------------------------------
Rental income
Northeast $29,697 $28,729
Mid-Atlantic 33,239 30,341
West 8,530 8,090
------- -------
Total $71,466 $67,160
======= =======
For the three months ended June 30,
2002 2001
- --------------------------------------------------------------------------------
Net operating income, including interest income on mortgage notes receivable
Northeast $22,406 $21,166
Mid-Atlantic 24,900 23,416
West 5,548 5,271
------- -------
$52,854 $49,853
======= =======
The Northeast
The Northeast region is comprised of forty-eight assets, extending from
suburban Philadelphia north through New York and its suburbs into New England
and west to Illinois and Michigan.
When comparing the second quarter of 2002 with 2001, rental income
increased 3.4% 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 4.4% 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 as well as increases associated with lease rollovers. Same
center rental income, excluding the contribution from property
35
redevelopments and expansions, increased 3.8%.
Net operating income, including interest income on mortgage notes
receivable, increased 5.9% from $21.2 million in 2001 to $22.4 million in 2002.
On a same center basis, as defined above, net operating income increased 7.0%
from $20.9 million in 2001 to $22.4 million in 2002, due to increases at the
recently redeveloped and retenanted shopping centers and higher participating
interest income on mortgage notes receivable. Same center net operating income,
excluding the contribution from property redevelopments and expansions,
increased 6.2%.
The Mid-Atlantic
The Mid-Atlantic region is comprised of thirty-two assets, including
Pentagon Row, which was substantially completed in 2002, extending from
Baltimore south to metropolitan Washington, D.C. and further south through
Virginia and North Carolina into Florida.
When comparing the second quarter of 2002 with 2001, rental income
increased 9.6% from $30.3 million in 2001 to $33.2 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 remained constant at
$30.2 million. The increase in rental income which was due primarily to
successful retenanting at several shopping centers and street retail properties
was offset by higher vacancy levels at three of the region's shopping centers.
There were no significant contributions from redevelopments or expansions in
this region during the three months ended June 30, 2002 and 2001.
When comparing the second quarter of 2002 with 2001, net operating income
increased 6.3% from $23.4 million in 2001 to $24.9 million in 2002. On the same
center basis as defined above net operating income remained constant at $23.2
million, with the increased rental income offset by vacancies and increased real
estate taxes.
The West
The Western region is comprised of thirty-four 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 9.2% from $7.8 million in 2001 to $8.5 million in 2002,
due primarily to increases from the recently redeveloped and retenanted
properties in the Los Angeles area and in San Francisco, California as well as
increases associated with lease rollovers. Same center rental income, excluding
the contribution from redevelopments and
36
expansions, increased 5.0%. On an overall basis, rental income increased 5.4%,
from $8.1 million in 2001 to $8.5 million in 2002.
On a same center basis as defined above, net operating income, including
interest income on mortgage notes receivable, increased 28.6% from $5.2 million
in 2001 to $6.6 million in 2002, due primarily to increases from the recently
redeveloped and retenanted properties in the Los Angeles area and San Francisco,
California and higher participation interest income on mortgage notes
receivable. Same center net operating income, excluding the contribution from
redevelopments and expansions, increased 24.4%. Overall net operating income
increased 5.2% from $5.3 million in 2001 to $5.5 million in 2002, reflecting the
above mentioned increases offset by the marketing, leasing and start-up costs
associated with Santana Row.
37
PART II - OTHER INFORMATION
Item 2. Changes in Securities and use of Proceeds
During the second quarter of 2002 the Trust issued 100,000 common shares of
the Trust valued at $2.8 million in exchange for 100,000 partnership operating
units. The issuance of such shares was exempt from registration under Section
4(2)of the Securities Act of 1933.
Item 4. Submission of Matters to a Vote of Shareholders
At the 2002 Annual Meeting of Shareholders on May 1, 2002 the Shareholders
elected Steven J. Guttman and Mark S. Ordan as trustees, to serve for the
ensuing three years. Holders of 27.7 million shares and 31.1 million shares
voted for each trustee, respectively and holders of 5.2 million shares and 1.7
million shares withheld their votes for each trustee, respectively.
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 as amended, filed with the Commission on June 6,
2002 as an exhibit to the Trust's Registration Statement on Form 8-A/A is
incorporated herein by reference thereto.
(10)(i) Severance Agreement dated March 1, 2002 between Federal Realty
Investment Trust and Larry E. Finger.
(ii) Combined Incentive and Non-Qualified Stock Option Agreement
dated February 28, 2002 between Federal Realty Investment Trust and Larry E.
Finger.
(iii) Performance Share Award Agreement between Federal Realty
Investment Trust and Donald C. Wood dated February 28, 2002.
(iv) Performance Share Award Agreement between Federal Realty
Investment Trust and Jeffrey S. Berkes dated February 28, 2002.
(99)(i) Written Statement of Chairman and Chief Executive Officer,
President and Chief Operating Officer and Senior Vice President and Chief
Financial Officer and Treasurer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350).
(B) Reports on Form 8-K
A Form 8-K, dated March 31, 2002 was filed on April 29, 2002 in response to
Item 5.
A Form 8-K, dated June 3, 2002 was filed on June 4, 2002 in response to
Item 4.
38
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
August 12, 2002 /s/ Steven J. Guttman
----------------------
Steven J. Guttman, Chairman of the
Board, Chief Executive Officer and
Trustee (Chief Executive Officer)
August 12, 2002 /s/ Larry E. Finger
--------------------
Larry E. Finger,Chief Financial
Officer (Principal Accounting
Officer)
39
EXHIBIT INDEX
(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 as amended, filed with the Commission on June 6,
2002 as an exhibit to the Trust's Registration Statement on Form 8-A/A is
incorporated herein by reference thereto.
(10)(i) Severance Agreement dated March 1, 2002 between Federal Realty
Investment Trust and Larry E. Finger.
(ii) Combined Incentive and Non-Qualified Stock Option Agreement dated
February 28, 2002 between Federal Realty Investment Trust and Larry E. Finger.
(iii) Performance Share Award Agreement between Federal Realty and Donald
C. Wood dated February 28, 2002.
(iv) Performance Share Award Agreement between Federal Realty Investment
Trust and Jeffery S. Berkes dated February 28, 2002.
(99)(i) Written Statement of Chairman and Chief Executive Officer,
President and Chief Operating Officer and Senior Vice President and Chief
Financial Officer and Treasurer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350).
40